Can Debt Consolidation Affect Your Credit Report?


Average household debt in India amounted to Rs.3.7 lakh crore in the financial year 2017-18, according to Bank of International Settlements. Multiple credits availed from different sources often impose hefty interest burden on borrowers, increasing their chances of defaulting or late repayment. Both lead to an adverse impact on the CIBIL score of an individual, affecting his/her credibility, which, in turn, hinder future loan approvals.

Individuals can obtain a debt consolidation loan to avoid such scenarios, wherein a personal loan can be obtained to repay all existing liabilities. The interest burden on borrowers is effectively reduced as well, along with flexible tenor benefits allowing them to determine those EMIs as per their financial status.

How does debt consolidation loan affect CIBIL score?

Having multiple loans in one’s name runs the risk of missing out on EMI payments or late repayment. Opting for personal loans for debt consolidation reduce the chances of such events, as individuals have to keep track of only one EMI repayment.

Timely repayments of a single EMI lead to the creation of a healthy credit report, ensuring high CIBIL score. A high credit score provides attractive interest rates levied on any future loans availed. Thus, opting for personal credits is a simple way to manage your debt.

How to apply for a debt consolidation loan?

Before applying for such credits from stipulated financial institutions, individuals can check free CIBIL score to get an approximate idea about the total loan value they are eligible for, as well as interest rates which may be levied on the same. Also, look into the facilities offered by numerous financial institutions, and choose one that offers the highest benefits.

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You can apply for a personal loan in the following steps –

Step 1 – Go to the official portal of the chosen NBFC and select ‘Apply for loan online.’

Step 2 – Enter your personal information such as name, age, credentials, etc. as stated in KYC documents.

Step 3 – Enter the loan amount and ideal tenor of repayment.

Step 4 – Enter details regarding monthly income.

Step 5 – Upload all relevant documents on the website directly.

Application for a debt consolidation loan is completed in the above mentioned steps. Following such application, verification of all details, and consequently documents furnished are conducted by the respective lender, upon which the sanctioned amount is disbursed to your bank account.

Instant and hassle-free approval allows individuals to repay multiple existing debts quickly. This eases the repayment burden considerably, ensuring timely EMI payments and healthy credit reports consequently.

Another significant benefit of such personal loans is that these credits are offered at attractive interest rates by major financial institutions. Top lenders such as Bajaj Finserv offer flexible repayment tenors on their loans as well as competitive interest rates.

They also provide pre-approved offers that make availing loans quick and easy. Such offers are available on multiple financial products including home loans, business loans, loans against property, etc. You can check your pre-approved offer by providing your name and phone number.

Instant approval and disbursal of such funds are ensured through such pre-approved offers. As personal credits do not have any associated end-use restrictions, individuals can utilize availed advances to meet any requirements apart from debt consolidation.

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Consolidating debts using a personal loan can, hence, help at optimal debt management, and in turn, have a positive effect on the CIBIL score of an individual. Healthy credit score encourage individuals to avail advances in the future, as they are extended against relatively lower interest rates.

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