Debt settlement refers to an agreement between you and the creditor in which the lender is ready to settle your loan for a reduced payment. This agreement is reached when the borrower lacks the capacity to repay the loan in full. Debt settlement is a better option than declaring bankruptcy. But you will need a substantial amount to settle your debt. In such a situation, you can use a personal loan to pay for your debt settlement. Just download the best loan app to apply for a quick online loan.
Read on to understand how you can use a personal loan for debt settlement.
Using a Personal Loan for Debt Settlement
Personal loans are unsecured loans that can be used to pay various expenses including consolidating your debts or settling debts. When taking out a personal loan to consolidate or settle debt, all the outstanding balances and debts are combined into one monthly payment.
Here are a few reasons why you should consider a personal loan to consolidate or settle your debts:
- Lower EMI – Availing a personal loan for debt settlement would result in a much reduced EMI. This is because when you opt for loan settlement you have to pay a reduced amount as compared to your total outstanding. This will help you accommodate the loan EMI in your monthly budget with ease.
- Help your credit score – Note that opting for debt settlement would negatively impact your credit score. But if you avail a personal loan for debt settlement, you can gradually work towards improving your credit score with regular and steady monthly payments.
- Pay off multiple high-interest debts: Debt settlement using a personal loan helps you pay off multiple high-interest loans. You will be able to have more control over your payments, which is the main benefit of taking out such a loan. The likelihood of missing a payment is much lower because there will just be one repayment due each month.
- Avail a new loan with a lower interest rate: When you take a new loan, you can negotiate with the lender for a lower interest rate. This will reduce your total loan cost and help you pay it off more conveniently. However, make sure to compare the interest rates levied by several lenders before applying for a personal loan with a certain lender
- Longer Tenure: Personal loans allow you to decide the tenure period to repay back the loan. Hence, you can opt for a longer tenure, wherein the EMI amount will be lesser. This, in turn, will reduce your EMI burden. Reducing the EMI will help you better manage your debt.
- Fixed Repayment Period: For personal loans, lenders typically provide a fixed repayment period ranging from one year to five years. The loaned amount must be paid back within this time frame. Planning your budget and paying off your loan without issues can be easier if you know how much you will have to pay the lender each month.
Features and Advantages of Personal Loans for Debt Settlement
The following are a few crucial characteristics and advantages of availing an online loan through the best loan app for debt consolidation:
- Instant Approval: The best loan app quickly approves your personal loan applications after verifying your details.
- Online Application: Many lenders now enable personal loan borrowers to submit online applications via their official websites. An online loan allows you to apply for an instant loan where processing such a loan is faster.
- Quick Disbursal: You can apply for a loan using the lender’s best loan app and upload the documents as required. If you fit the eligibility criteria and your documents are in order, the loan will be processed rapidly, and the amount will be disbursed immediately into your account.
- Flexibility: One of the main advantages of obtaining a personal loan is the flexibility to select any repayment term between one and five years, depending on your ability to make payments.
- Prepayment Option: Lenders who offer personal loans will permit you to prepay your loan amount during repayment. Prepayments can speed up the payback of your loan.
With debt consolidation, you can take out a single loan to pay off your current loans. Repaying multiple loans at once might be exceedingly challenging. Multiple EMIs are complicated to track and pay on time. Debt consolidation helps to reduce the number of loans you have to repay. You can use the best loan app to avail of a personal loan to consolidate or settle all your debts as a single-payment loan.
You must satisfy the lender’s eligibility requirements for your personal loan application to be granted. Therefore, before applying for an online loan, review the lender’s qualifying requirements. Make sure you meet these requirements before applying for a personal loan. Also, note that debt settlement may negatively impact your credit score. So, think before applying for a settlement.