1 September 2021
With the growth in popularity of fintech and eCommerce, lifestyle upgrades have become accessible to almost everyone. With instant online loans, credit cards, and other debts to help manage the cash flow, people are now able to afford cars, homes, electronics, vacations, or even skill upgrades they previously wouldn’t have had access to.
However, for all the benefits that proper utilization of debt could bring to your life, it is very easy to misuse this powerful tool. You could find yourself in a situation where you’re paying multiple debt bills of different interest rates (also affecting your credit score) just to stay afloat. Managing multiple debt payments can be a very hassle-some process, and you could end up paying a lot in interest.
In recent times, debt consolidation with instant loans has become extremely popular to remedy this very situation. Say, you have taken out different loans from different lenders (regardless of the type of loans – could be from loan sharks or credit card companies), chances are you’re paying up an obscenely high amount of interest. While credit cards charge approximately 40% per annum, the rates in the unorganized debt sector are definitely worse. You will end up paying significantly more than what you’ve spent, regardless of whether it is for an emergency or a simple shopping splurge.
The process of debt consolidation is simple. You get a cheap instant loan, preferably structured to be paid within five years, and use that loan to pay off all your debts. This way, you’ll only really need to manage a single debt, and with the help of companies like EarlySalary, you might end up paying as low as INR 6/day instead of spending a hefty sum on interest payments.
Some benefits of choosing a debt consolidation instant loans are:
Since you’re opting for a cheaper loan, the amount of money you’ll have to pay per month decreases. Also, if the repayment period of the consolidation loan is higher than your existing debt, you’ll end up paying less per month to meet your obligations.
For instance, if your monthly obligations on previous debts amount to INR 10,000 a month, for 6 months (total obligation of 60,000) – you could take a debt consolidation loan repayable over a year and end up paying 5,000 a month to meet the same obligation.
Different interest rates for different loans make it extremely easy to default on payments and risk penalties (and worse, negative impact on your credit score). Choosing an instant debt consolidation loan means that you only need to monitor and track the loan at a fixed interest rate to ensure that you know the exact monthly outflow.
Instant loans, like the ones on offer at EarlySalary, come with 0 collateral requirements. In addition, you do not need to provide any guarantor to support your loan. The entire application and sanction process is quick and easy.
The number of loans outstanding and all defaults in payments create an adverse impact on your credit score. By consolidating your debts to a more favorable loan, you’ll have the opportunity to minimize the risk of defaults and pay back the loan on your terms (and thus having a direct impact on your credit score.)
The interest that you’ve already paid on your existing debt cannot be recovered. By restructuring to a long-term loan, you might end up paying less per month but more money in the long run (even if the interest rate is cheaper). For instance, three 20% loans for INR 10,000 each repayable over a period of six months will have you pay INR 3,000 as interest, while one 15% loan for INR 30,000 for one year will have you pay INR 4,500 as interest.
When you avail of an instant loan, you need to pay the processing fees along with the applicable taxes like Goods and Service Tax (GST). Additionally, the existing lenders may levy prepayment penalties if you repay the money before its due date. It is recommended you consider these prepayment penalties and other charges when applying for an instant loan as it increases the effective cost of borrowing. Luckily, with EarlySalary’s no hidden fees and prepayment fees policy, you’ll be able to get your hands on debt consolidation loans without all the negatives.
Ultimately, your obligation to meet your financial debts cannot be neglected. However, we strongly urge you to use platforms like EarlySalary to ensure you have the best tools available to meet your debt obligations. To know more, reach out through
Download the EarlySalary app here, and be a part of the #OneInAMillion experience.