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Today having a credit card is no big task. It is easier to even get two credit cards when you have one. The trouble begins when you can't pay on the due date and have to cough up reasonably high amount in terms of interest rates in the range of 36% to 42%. For those who indulge themselves and utilise their cards to almost maximum limit have to pay a hefty amount. Such outstanding amount due to default is the first sign of a debt trap for an individual. Many times people end up fighting with banks and do not pay the bills and get a 'settled' remark on their credit card account, which in turn pull down their CIBIL credit score. However, all these plights can be avoided if you choose to consolidate these loans and save money too.

 

Let us understand how it works at your benefit. Instead of paying money on multiple credit cards at high rate of interest of 36% to 42%, it makes sense to take a personal loan at say 18% per annum. You can also take a loan against property or some other asset such as gold, securities too which comes at a lower rate of interest in the range of 12% to 14%. If you have such assets to offer as a collateral it can come handy. Banks too find it easier to lend against assets since they know that if you do not pay back on time, they can sell off the asset and recover the money.

There are situations where individuals do not have such assets to offer. But these have an existing home loan that is yet not closed. In due course, the income of the borrower goes up and so does the price of the house. In such a case, the borrower can approach the bank for a top-up loan to pay off his high priced loans such as credit card outstanding. Typically, top-up loans and loans against property come with long tenures of around five years, and can be used if you need more time to repay your debts. But do not stretch it too long since it means you are paying too much in interest. It is advisable to consolidate all such high priced loans into a single loan of maximum three years.

While opting for debt consolidation, you should keep utmost transparency. It is better to tell the bank about the purpose behind applying for such a loan. There is no point hiding that you are running too much credit outstanding on your credit cards. Banks invariably accesses your CIBIL credit report before approving loan to you. If the bank finds out that there is much credit outstanding on your cards, it may not be comfortable offering you another loan. But if you make it clear that you intend to pay off your credit card debt, and for that you are taking this debt consolidation route, there are high chances that you may get the loan.

Now, comes the most important point. After you get the loan from the bank. Pay off all your credit card outstanding quickly and diligently start servicing this one large loan. If you do not pay this off, you stand to lose the assets offered as collateral, if you have offered one. You can also take this debt consolidation route to save on your money if you have too many personal loans and you have assets to raise money cheap against them. For many the savings they make taking the debt consolidation route may not be limited to the extent of the interest saved. One must also factor in the peace of mind one would get in this process while calculating the benefits of a debt consolidation process.

Happy Investing!!

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. ICICI Prudential Tax Plan Invest Online
2. HDFC TaxSaver Invest Online
3. DSP BlackRock Tax Saver Fund Invest Online
4. Reliance Tax Saver (ELSS) Fund Invest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) Fund Invest Online
7. SBI Magnum Tax Gain Scheme 1993 Invest Online
8. Sundaram Tax Saver Invest Online
9. Edelweiss ELSS Invest Online