{"id":6327,"date":"2022-01-10T15:45:05","date_gmt":"2022-01-10T10:15:05","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=6327"},"modified":"2022-05-24T10:52:19","modified_gmt":"2022-05-24T05:22:19","slug":"debt-consolidation-2","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/debt-consolidation-2\/","title":{"rendered":"Debt Consolidation: 7 Things To Keep in Mind Before Consolidating Debts"},"content":{"rendered":"\n<p>Simpler debts like credit card bills, small loans, <a href=\"https:\/\/www.tickertape.in\/blog\/international-students-day-2021-investing-lessons-to-learn-from-students\/?utm_source=blog&amp;utm_medium=article\">student<\/a> loans and others help people realise their goals independently. However, the accumulation of multiple debts like these can significantly impact your <a href=\"https:\/\/www.tickertape.in\/blog\/errors-to-get-rectified-in-credit-report\/?utm_source=blog&amp;utm_medium=article\">credit score<\/a>, especially if you cannot keep up with the repayment schedule.<\/p>\n\n\n\n<p>Consolidating your <a href=\"https:\/\/www.tickertape.in\/blog\/should-you-invest-when-in-debt\/?utm_source=blog&amp;utm_medium=article\">debts<\/a> under one bigger loan may help streamline and monitor your loans. Although <a href=\"https:\/\/www.tickertape.in\/blog\/debt-consolidation\/?utm_source=blog&amp;utm_medium=article\">debt consolidation<\/a> is a simple process, there are some details you need to take care of. This article explores what you need to keep in mind before consolidating your debts.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/debt-consolidation-2\/#What-is-debt-consolidation\" title=\"What is debt consolidation?\">What is debt consolidation?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/debt-consolidation-2\/#Factors-to-keep-in-mind-before-consolidating-debts\" title=\"Factors to keep in mind before consolidating debts\">Factors to keep in mind before consolidating debts<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/debt-consolidation-2\/#Analyse-your-current-debt-situation\" title=\"Analyse your current debt situation\">Analyse your current debt situation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/debt-consolidation-2\/#Assess-your-credit-score\" title=\"Assess your credit score\">Assess your credit score<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/debt-consolidation-2\/#Consider-your-income\" title=\"Consider your income\">Consider your income<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/debt-consolidation-2\/#Understand-the-risks\" title=\"Understand the risks\">Understand the risks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/debt-consolidation-2\/#Opt-for-the-right-lender\" title=\"Opt for the right lender\">Opt for the right lender<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/blog\/debt-consolidation-2\/#Revisit-your-finances-and-financial-habits\" title=\"Revisit your finances and financial habits\">Revisit your finances and financial habits<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tickertape.in\/blog\/debt-consolidation-2\/#Chalk-out-a-plan\" title=\"Chalk-out a plan\">Chalk-out a plan<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tickertape.in\/blog\/debt-consolidation-2\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"what\"><span class=\"ez-toc-section\" id=\"What-is-debt-consolidation\"><\/span>What is debt consolidation?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><a href=\"https:\/\/www.tickertape.in\/blog\/debt-consolidation\/\">Debt consolidation<\/a> is the process of taking out a new <a href=\"https:\/\/www.tickertape.in\/blog\/personal-loan-with-low-credit-score\/?utm_source=blog&amp;utm_medium=article\">loan<\/a> to pay off a range of smaller debts and liabilities. Several debts at different interest rates can negatively impact your overall finances since you could be losing a lot of money with sky high-interest rates. Debt consolidation allows you to take one loan at a lower <a href=\"https:\/\/www.tickertape.in\/blog\/flat-interest-rate-vs-reducing-balance-interest-rate\/?utm_source=blog&amp;utm_medium=article\">interest rate<\/a> and pay off multiple debts you may have accrued.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"factors\"><span class=\"ez-toc-section\" id=\"Factors-to-keep-in-mind-before-consolidating-debts\"><\/span>Factors to keep in mind before consolidating debts<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Analyse-your-current-debt-situation\"><\/span>Analyse your current debt situation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Before starting your debt consolidation journey, it would be wise to reflect on your overall debt situation deeply. While debts are healthy and allow you to purchase high-value goods and services, debt accumulation is not beneficial for your finances, <a href=\"https:\/\/www.tickertape.in\/blog\/habits-that-hurt-credit-score\/?utm_source=blog&amp;utm_medium=article\">credit score<\/a>, and of course, the future.<\/p>\n\n\n\n<p>Analyse best how to navigate such situations and prevent them in the future. This may also act as an eye-opener for you to start actively managing your finances and debt.&nbsp;&nbsp;<\/p>\n\n\n\n<p>You may want to be wary of becoming carefree with your debts or believing that debt consolidation could be a cushion to fall back on. It isn\u2019t.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Assess-your-credit-score\"><\/span>Assess your credit score<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Debt consolidation may have an immediate effect on your <a href=\"https:\/\/www.tickertape.in\/blog\/get-an-instant-loan-without-credit-score\/\">credit score<\/a>. Since you already have a lot of debt accumulated, adding another significant debt in the form of debt consolidation can lead to a sharp drop in your credit score.&nbsp;<\/p>\n\n\n\n<p>However, there is no need to be alarmed. Your credit score will start climbing as you keep up with the repayment schedule for the bigger loan. It is also essential to assess your latest credit score since the new loan&#8217;s <a href=\"https:\/\/www.tickertape.in\/blog\/flat-interest-rate-vs-reducing-balance-interest-rate\/\">interest rate<\/a> will significantly depend on your credit score.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Consider-your-income\"><\/span>Consider your income<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It must always be remembered that consolidating your debts by taking out a bigger loan does not end your debt woes. The bigger loan needs to be paid off as per the repayment schedule opted by you. You will have to fulfil all the obligations as per the terms of the debt agreement. For this, it is imperative to consider your current income and income stability.<\/p>\n\n\n\n<p>This will help you analyse if you will be able to keep up with the monthly repayments. You may want to have a buffer of 2-3 mths&#8217; worth of EMI in your account to make sure you do not default on the repayment even in the most adverse conditions.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Understand-the-risks\"><\/span>Understand the risks<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Although debt consolidation is a fairly secure and straightforward process, there are some risks you must be aware of before you consolidate your debts.<\/p>\n\n\n\n<ol><li>You might end up paying a high amount of money as interest if you choose a longer repayment period.<\/li><li>The processing fees for <a href=\"https:\/\/www.tickertape.in\/blog\/alternatives-to-personal-loans\/\">personal loans<\/a> tend to tilt on the higher side. Ensure that you research and compare these charges intricately before making a decision.<\/li><li>Secured loans generally require collateral. If you fail to repay the loan amount on time, the bank will seize the collateral. Since this is extremely risky, you may consider exploring collateral-free loans, however, they come at a much higher interest rate.<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Opt-for-the-right-lender\"><\/span>Opt for the right lender<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Choosing the right lender can make a lot of difference to the rate of interest you are offered. Consider reliable banks with a high customer rating. Enquire about the bank&#8217;s charges on the loan and compare it with its peers.<\/p>\n\n\n\n<p>If you plan to foreclose the loan early, make sure that the bank you choose levies no foreclosure charges or they are minimal to avoid burning a hole in your pocket.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Revisit-your-finances-and-financial-habits\"><\/span>Revisit your finances and financial habits<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Debt consolidation may help you move on to a stable financial path and help you inculcate solid <a href=\"https:\/\/www.tickertape.in\/blog\/should-you-offer-a-personal-finance-management-course-to-employees\/?utm_source=blog&amp;utm_medium=article\">personal finance management<\/a> skills. Consistency in repayments will also help you develop a financial discipline to ensure a future of no debt. This is also the right juncture to revisit your financial habit, set spending limits, and cap your debts.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Chalk-out-a-plan\"><\/span>Chalk-out a plan<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Lack of savings and a well-planned repayment schedule can set back your finances and push you further into debt. To avoid getting into a <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-a-debt-trap\/\">debt trap<\/a>, stay focused on having a plan and repay the loan amount in the shortest duration possible.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Debt consolidation can be an excellent tool for collating and managing the multiple debts you owe to different lenders. However, debt consolidation must be done right to reap its maximum benefits. It is paramount to consider factors like debt amount, interest rates, repayment horizons, lenders\u2019 charges etc. Understand all its aspects of debt consolidation and only then make a decision.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Looking to know if debt consolidation is a good idea? Click here for the most important things to know about debt consolidation before indulging in it and find out its pros and cons.<\/p>\n","protected":false},"author":45,"featured_media":6329,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[8,1754],"tags":[434,1063,1064],"acf":[],"modified_by":"Anjali Chourasiya","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2022\/01\/2.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/6327"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/45"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=6327"}],"version-history":[{"count":3,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/6327\/revisions"}],"predecessor-version":[{"id":8565,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/6327\/revisions\/8565"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/6329"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=6327"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=6327"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=6327"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}