Debt consolidation is combining multiple debts into a new loan that has better terms, like lower interest rates. The money from this new loan is used to pay off the other debts, allowing consumers to clear a small debt by taking one larger loan.
Debt consolidation can be applied to unsecured loans, such as education loans, credit card balances, and personal loans.
For consolidating debts, the borrower requests a personal loan from the bank. Once approved, they use this loan to pay off their existing balances and after clearing the previous debts with a new loan, the borrower makes a single monthly payment for the new loan.
With a personal loan, one can manage and pay off debts in a cost-effective way, avoiding the hassle of handling multiple payments.
For obtaining personal loans, one does not require any collateral or a guarantor.
The approved loan amount is immediately transferred to the savings bank account, therefore, helping the borrower pay off debts quickly.
To apply for a debt consolidation loan, one needs to have identity proof, address proof, documents supporting the ability to repay the amount and employment proof.
Compiled by Syed Muskan