Before understanding why debt consolidation loans are a better option, you need to first understand what debt consolidation is. Debt consolidation loans are used go pay off larger debts in exchange of paying the instalments for the one particular loan. Getting a debt consolidation personal loan Singapore is a popular option because it is helps to manage the payments and to negate multiple debts with a single one. But is it really a feasible option?
Reasons to take a debt consolidation loan
There are several reasons why people like to take up debt consolidation loans. Some of these reasons are:
- Easier to manage
The most popular reason why people choose in Debt Consolidation loans is it is one single loan instead of multiple debts. No amount of debt is feasible. However, having multiple debts can become confusing. Not only will it add to the stress of paying back each of the loans on time but you need to remember each of the loan. It can become quite tiring. The only solution to this is a debt consolidation personal loan. You just have to keep track of one single loan instead of multiple ones. This will ensure that you do not miss any of the payments.
- Increasing credit score
Having to multiple debts can tarnish your credit score. It is extremely important for you to have a good credit score as it helps you to apply for loans in future. Even if you do not have a plan to apply for any more loans, you might need it in case of an emergency. Taking up a consolidation loan is a good option to increase your credit score. If you pay off all your debts on time and you pay the instalments for the debt consolidation loan on time, your credit score will instantly go up. A high credit score can also help you to score loans at a lower interest rate. Hence, it is important that you keep a check on it.
- Tax deductions
When you compare personal loans with any of the other methods of securing a loan, you will see that no other method assures tax deduction. If there are talks of home equity, you can get tax deductions easily. However, it is only in case of secured loans not the unsecured ones. Secured loans are those where you have to give in any form of security to get a loan. Unsecured loans are common when it comes to debt consolidation as you do not have to pay any form of security to get approved for a loan.
- No more security
In case you do not wish to look for tax deductions, you can choose an unsecured debt consolidation personal loan Singapore. Most of these personal loans are unsecured. That is because it is for people who are already in a lot of debt. If you are one of them, it is easier for you to get a loan without, any kind of asset, to pay off all your debts.
- More feasible than debt settlement
Even though debt settlement and debt consolidation have similar goals, the process is entirely different. Debt settlement is when you convince the people you owe money to to reduce the debt. Debt consolidation, on the other hand, doesn’t depend on the investors but on you. You get to pay back all the debts with one single debt consolidation loan. Debt settlement is not an easy process. It can take upto 2-3 years to get it done. Moreover, there are cancellation fees that you might have to pay. Debt Consolidation loans, on the other hand, buy you time and makes your life easier.
- Lower interest rate
If you compare personal loans for debt consolidation interest rate with any other kind of debts, you will notice that it is way lesser. The more number of debts that you have, the more interest you need to take care of. Moreover, if you miss any of the payments, the interest rate goes up. However, you won’t encounter such troubles in case of a debt consolidation loan. The amounts of such loans are more and hence, the interest rates are usually lower.
- Save more on a monthly basis
Even though debt consolidation loans are usually of a huge amount, you can still save a lot of money on a monthly basis. Singapore is an expensive city and if all your monthly earning is going away to repay back your loa, then it can be a problem. However, if you pay all your debts with one debt consolidation loan, you can slowly pay back the instalments within a fixed time period. You can increase the tenure which will result in a decrease in the monthly instalment amount.
- Choose your timing
Debt consolidation loans are a blessing. Such kinds of loans are extremely flexible. It allows you to choose the tenure. You can choose to repay back the loan as soon as possible. Or else, you can take your time and slowly repay back your loan. It completely depends upon you.
There are a lot of advantages of getting a personal debt consolidation loan. While credit cards just increase the burden of debt, such loans can be a boon. All you need to do is to be careful and use the amount that you receive from a debt consolidation loan wisely. You should not spend it on unnecessary things. Instead, it should be completely used to pay back all your debts. Do not borrow more than you need. Even though the interest rate is lower than any other option, more money will result in more complications. Stick to the amount that you need to clear your debts. There are several organisations where you can apply for a debt consolidation loan. Make sure that you have your documents ready. Do not waste anymore time. Start applying as soon as possible!