There are many reasons why we would choose to apply for a personal loan. Most people have historically used this facility in order to extinguish any current financial blazes and repay the loan amount over a period of time. Similarly, if individuals wish to acquire something that is outside of their current financial ability, they might seek the services of a personal loan in order to do so.
Personal loans are employed for a wide variety of causes, ranging from funding the purchase of a new car, funding an event such as a birthday party or wedding, and even in order to fulfill education-related bills. However, there is also a way wherein one can, instead of using personal loan interest rates to put out financial fires, use it in order to ensure that no such fires crop up, to begin with. In this article, let’s take a look at how you can apply for a personal loan and employ it to consolidate your debt.
The use of personal loans in order to consolidate debt is not a new or revolutionary process and has been in use long enough to afford the process its own unique title, known as the process of debt consolidation. Debt consolidation is where you apply for a personal loan and use that amount to pay off other existing debt. Through this process, you have bought yourself enough time through the low personal loan interest rates to be able to pay off any debt you have without the risk of penalties. Let’s dive deeper to understand how this works.
How to Consolidate Your Debt
One of the most common uses of debt consolidation and why individuals apply for a personal loan is its use in paying off credit card debt. Thus we will use this example for the purpose of our understanding and note that regardless of the type of debt you are trying to consolidate, the process and premise remain the same.
Credits are essentially a loan-taking facility. At the end of the month, you pay off everything you have spent using the card. The catch, however, is that credit cards are infamous for their high interest rates. If you miss a payment, this will result in the dedication of your credit score, which will result in increased payments later, and so the cycle continues. How do we fix this? With debt consolidation of course.
Personal loans interest rates are comparatively much lower than those of a credit card. Therefore, you could set up a system wherein you hedge your credit card bill and apply for a personal loan that will take care of these payments. This way you ensure that your credit card bills are paid on time no matter what. Due to the low personal loan interest rates, you can then pay off the personal loan with its more lenient interest rates and payback procedures.
Debt consolidation is a useful financial tool if employed correctly, as we can see in the article above. However, one must also be cautious so as to ensure you do not overextend yourself under the guise of having debt consolidation to back you up. If you are looking to take out a personal loan to consolidate debt, the Finserv MARKETS website has a wide variety of personal loan offers. Visit the Finserv MARKETS website to apply for a personal loan today.