Monetary debt from a wide range of lending sources such as home finances, car finances, credit cards, etc. can lend you in hefty EMIs, mounting interest rates, & various debt accounts. You may end up looking for an easy and quick way to clear off your debt and may even dig into your savings or deposits. However, there is one better alternative option that can come to your rescue – taking a personal loan (PL) at a low rate of interest for debt consolidation.

There are several banks and non-banking institutions in the UAE that offer personal finance at an attractive interest rate that can be utilized for debt consolidation. With the help of it, you can easily pay off your multiple balances and then repay the loan amount in easy to pay monthly payments for a set tenure.

Here is why it makes sense to pay off your debt with PL.

Why Personal Finance is Better Option for Debt Consolidation?

A consumer finance that is taken for the sole purpose of debt consolidation combines several debts /balances into one single amount that will have to be paid on a monthly basis. Following are the key reasons why you should opt for a personal finance to pay off your debt:

  • Single EMI Vs Multiple EMIs: Without any doubt, keeping a record of numerous EMI payments can be a daunting task. If you miss repaying any of your EMIs, you may also have to pay hefty penalty charges. This will also affect your credit score and relationship with the lender negatively.

In order to avoid all such hassles, you can use a personal loan in UAE for debt consolidation.  It is certainly an easier option to make a single loan payment through EMI every month in comparison to 3-4 EMIs. Consumer finance for debt consolidation enables you to consolidate all your different EMIs into one single EMI. Henceforth, it makes repayments simple and easy.

  • Low-Interest Rate: You may find that the rate of interest levied for a PL is lower than the current rate of interest that you pay. In such cases, procuring consumer finance for debt consolidation is a feasible option. Make sure, you compare the rate of interest levied by different lenders before you apply for it.
  • Fixed Loan Repayment Tenor: Lenders usually offers a loan repayment tenor between one year and five years for a personal loan in UAE. The borrower will need to make the repayment within this time frame. Knowing already how much you will have to repay to the lender every month can assist you to pay off your loan and plan your finances with ease.

Main Features & Benefits of Personal Finance for Debt Consolidation

Here are the key features & benefits of PL which makes it the best option for debt consolidation:

  • Timely Approval: Majority of the lenders approve PL applications on time. They just verify and approve the application & supporting documents.
  • Online Application: You can enjoy the privilege of applying for a personal finance online through the official website of a particular lender. Doing this will enable you to compare different personal loan offered by various lenders based on their interest rate, processing fee, and other main features.
  • Fast Disbursal: The finance amount that you apply for will be disbursed into your bank account quickly as soon as your application is approved by the lender.
  • No Guarantor/Collateral: PL is an unsecured loan so you don’t need to submit any collateral or guarantor while opting for it.
  • Flexibility: One of the major benefits of availing a personal loan is that you can choose any repayment tenure period between one year and five years as per your convenience. In addition to this, you can also apply for the desired finance amount to clear off your debts.
  • Prepayment Facility: Banks or lenders also enable its borrower to make a prepayment of a finance amount during the repayment tenor. However, you may have to pay nominal charges for making a prepayment of a finance amount.

Will Paying Off Debts with a Personal Finance Affect Your CIBIL Score?

If you’ve multiple debts, keeping a track of different EMIs can be a very difficult task. And if you miss repaying even one of your EMIs within a payment due date specified by a lender, you may also have to pay a hefty penalty fee. Furthermore, there are also high chances that missing your EMI payment could affect your CIBIL score negatively and make it difficult for you to avail a PL or any other type of funds in the future.

To avoid such hassles, you can avail a personal finance for debt consolidation. Doing this will allow you to make repayments easily since you will only have to pay a single EMI every month, thus reducing the chances of your missing EMI payments. Ultimately, paying your EMI within the due date specified by the lender will help you maintain a good CIBIL score.

Important Things to Consider While Availing a PL for Debt Consolidation

Borrowing a personal finance is indeed an ideal option for debt consolidation if multiple repayments are becoming a hassle. Here are a few important things which you must consider before taking it:

  • The Tenor of Your Existing Debts: Be sure you check the tenor of your existing debts before availing a loan to pay off them. And if, in case, you find that you will be able to make repayments of your debts then it doesn’t make sense to avail PL for the sole reason of debt consolidation.
  • CIBIL Score: Your credit score is one of the key factors that will affect the rate of interest levied by the lender. If you have an excellent or good credit score, you will be charged a reasonable rate of interest. But if you have a bad credit score, you may expect to pay a high rate of interest. So, availing a loan for debt consolidation is only a feasible option if you charged a low rate of interest. Make sure, you check your CIBIL score before borrowing personal finance. Only proceed with your loan application if you know that you have a good CIBIL score and have a great chance of availing a PL at a competitive interest rate.
  • Compare Rate of Interest: Another important factor when borrowing a PL is the rate of interest as it leaves a significant impact on your loan repayment amount. That is why it is advised to compare the rate of interest charged by the different lenders or banks before deciding which bank to apply to.
  • Repayment Term: You can opt for repayment tenure between one year and five years. That means you will be consolidating all of your debts and repaying the loan amount within this time period. So, choose the suitable tenure period as per your repayment abilities.

In A Nutshell

There are various banks and financial institutions that offer a personal loan in UAE for debt consolidation. These lenders charge a reasonable interest rate and offer flexible repayment tenure to make it easy for the borrower to repay the loan amount.

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