How To Deal with Credit Card Debt Using Personal Loans?

Credit Card Debt

Credit Card Debt

Introduction

In India, credit card debt is a significant problem for many people. A credit card is a very convenient and helpful financial tool. It allows people to pay essential bills on time and arrange the much-needed cash during emergencies. Currently, there are 64 million credit card users in India. Their numbers are increasing fast with each passing day. Almost all banks in India issue credit cards to eligible people. Hardly anyone disagrees that using a credit card adds more comfort & pleasure to our life. But it is suitable only for financially disciplined people who can monitor their finances regularly and pay off debt on time. People who intend to use a credit card must have a stable income every month. Delinquencies on a credit card can worsen your credit score and make you default on the loan. If you default on credit card payments, the bank may reject your application for a new loan.

In India, people say that money doesn’t stand still on the one hand. It keeps moving from one hand to another. You hardly care about meeting luxurious needs when you have only a basic income. When you apply for a credit card, the bank may issue a card against your name with a specific expenditure limit. You can use a credit card to buy a wide range of products and lead a healthy financial life. You need to pay them with credit card payments at the end of every month.

 

 

Sometimes, numerous people fail to exercise control over credit card use. They spend more than their capability. When repayment time comes, they don’t have funds at all. Defaulting on credit card payments can bring about unpleasant consequences:

Numbers of Times You Miss Payment on Credit Cards Consequences
1-2 ●     Damage to your score,

●     Loss of initially given APR, and

●     The bank may impose late fines against you.

3 Missed payments ●     The bank may close your credit card,

●     More damage to your credit score, and

●     The bank may impose heavy late penalties against you.

More than 3 missed payments ●     Late penalties,

●     More damage to your credit score. The bank may take legal action against you, and

●     Your debt is transferred to the debt collection agency. Their agents make all possible measures to recover the unpaid bills.

credit card payments

Credit card payments default means you face a cash crunch, or financial indiscipline rocks your life. Many people never hesitate to take monetary help from relatives, office colleagues, friends, and associates to make credit card payments. Usually, money spoils relationships between two people when things go wrong because of any reason. A personal loan for salaried is a good option if asking for monetary help from close relatives goes against your self-esteem and reputation. 15% of all credit card holders resort to loans to repay credit card bills in India. After all, why do you need to consolidate the debt? How do personal loans online help you in this regard? Let’s see.

Also Read : Factors That May Affect Your Personal Loan Interest Rate

A Detailed Overview of Debt consolidation

debit consolidation

Today, many Indians have several outstanding loans simultaneously. It puts a severe financial burden on them and complicates the overall process of paying off debts. Upon your request, many banks in India offer credit consolidation services. It allows you to combine several loans under a single agreement & get rid of debt repayment commitments comfortably. The main prerequisite for debt consolidation is having two or more loans from different banks. Remember that most banks allow you to combine up to 5 loans. You can join outstanding cash and credit card loans, medical loans, and microloans. It is inconvenient for a borrower to pay off debt simultaneously in several banks. Debt consolidation allows people to minimize the disadvantages associated with having several loans. If several loans cause difficulties for a borrower and threaten him with penalties, it is optimal to resort to debt consolidation.

Debt Consolidation: Key Advantages at a Glance

  • Optimization of monthly expenses. When you combine the loan consolidation process with loan rollover, it reduces the monthly payment amount,
  • After debt consolidation, you have a new loan with a reduced interest rate,
  • Simplification of the credit debt management process- Instead of making five payments to different banks, you pay off the loan to one financial organization,
  • It helps people maintain a good credit history in case of potential financial problems, avoid late payments and forced debt collection.
  • You can close multiple loans through refinancing and get a comfortable payment schedule without delays. By combining loans, you get an ideal debt repayment scheme that meets your needs in the best possible way. For example- you can choose a convenient date for loan repayment and link it to the date of receiving a salary.

Why Do People Intend to Combine Multiple Loans?

  • You may face temporary financial difficulties due to a decrease in solvency. It happens because of loss of employment, taking sick leave, having a baby, etc.
  • Systematic errors and delays in the payment process due to confusion with contributions,
  • Many people have the desire to reduce the total amount of overpayment on loans, revise interest rates and commissions, and optimize the level of the financial burden on the monthly budget and
  • You want to change the loan repayment data.

Limitations of Debt Consolidation

Before resorting to debt consolidation, evaluate all its pros and cons. Its main limitations or disadvantages are detailed below:

  • Banks may demand collateral and guarantees for debt consolidation. At the same time, you must agree to the changed terms and conditions and get ready to cover a more significant debt. If the previous loan was secured, it becomes difficult to consolidate. It will require the withdrawal of collateral by the last Bank and the reissue of collateral to another bank.
  • You may face difficulties during the consolidation of large debts as banks issue limited credit limits for this process,
  • Not all banks are ready for loan consolidation,
  • You need an extensive set of documents for debt consolidation, and
  • You will have to bear additional costs while consolidating loans.

Unique Features of Debt Consolidation

The loan consolidation procedure involves going through the following steps:

  • You need to consult the bank manager, apply for debt consultation, and attach the required documents,
  • The Bank will review your application and verify the supplied details. This process will take at least three days,
  • The borrower applies to full early repayment of the loan. The Bank (which consolidates credit debts) transfers your application to other banks the amount required for full early repayment of the loan.
  • The borrower still acts as a debtor, but he repays the consolidated loan to one Bank.

Who Can Apply for Debt Consolidation?

The requirements for debt consolidation depend on the borrower’s condition and rules a bank observes. But some points are pretty standard with all banks participating in this process:

  • Individuals must have stable employment with a regular monthly income,
  • Good credit history, and no active delinquencies. Contact the banker and let them know about everything. Attempts to hide delinquencies will have negative repercussions, and
  • Your repayment capability matters a lot when applying for debt consolidation. You must have regular income and additional resources to repay a combined debt.

Do your homework carefully and apply for debt consolidation. If you complete all formalities as per the Bank’s instruction and quality all terms and conditions, chances are higher that you get a nod from the financial organization.

Also Read : Tips To Get Your First Personal Loan From Banks and NBFCs in India

Taking A Personal Loan for Debt Consolidation: Follow These Helpful Tips!

Multiple banks offer personal loans for credit card payments. They all try to make suitable offers to many customers and sell their loan products as far as possible. The availability of too many options often confuses people’s minds. They remain in a state of dilemma and find themselves unable to make a concrete decision. Here are some valuable tips that will help you increase chances for loan approval & get the desired money for credit card payments-

  • The Loan Amount You Need

Sometimes, it seems awkward to take a personal loan to repay credit card bills. Many people will make fun of your reckless spending habits and may criticize you for this. Don’t get discouraged because of people’s criticism and determine how much money you need to clear credit card payments. Pending credit card payments don’t mean that you are financially ruined. You still have the right to take a loan and remove the pressing bills which can’t be avoided further. Carefully analyze your requirement for money and start the loan application process.

  • Choosing A Bank

choose a bank

Different banks in India offer personal loans to many eligible folks. When looking for personal loan offers made by various banks, sometimes it becomes challenging to make an intelligent choice. It would help if you studied different offers of personal loans. Compare them with each other in terms of the loan amount, Bank’s policy, interest fees, repayment tenure, terms and conditions, eligibility criteria. Many times, people don’t understand complex financial terms. So, they must seek expert help to understand personal loan offers fully. It will help them choose the best Bank that provides the most suitable personal loans.

  • Meeting Eligibility Criteria and Terms And Conditions

Different banks put a diverse set of eligibility criteria for personal loans. In recent years, they have started offering personalized loan products. In general, individuals looking for personal loans online must hold employment, get regular monthly income (from Rs 20,000- Rs, 30,0000 every month- it depends on the chosen Bank and location), have a good credit score (750 or more), and an active bank account. Apart from this, they need to have pepper identity and residence documents.

  • Taking A Loan for Credit Card Payments: Think of A New Debt Burden

For banks, the debt burden on a borrower is very critical. If they come to know that the borrower is already submerged into a huge debt burden, they might refuse an application for a new loan. When you apply for a personal loan, the Bank will never ask for the purpose of taking a new loan. But it will investigate the debt burden you are carrying right now. You must convince the Bank that your earnings are regular & consistent. Taking a new loan (for credit card payments) won’t harm the monthly budget & repayment potential- the Bank must feel this.

  • The correct submission of an application to the Bank

application submission

The proper application submission is reasonably necessary to get approved for personal loans. Banks don’t like applications with incorrect or misleading information. They will reject your request for online personal loans if the application carries false data. Choose any loan application method and hand over accurate information to the Bank using an application form. Correct information allows bank executives to process your application much faster, accomplish all formalities and decide (about providing you a loan or not). Generally, banks will approve your application for the loan if everything seems OK after background checks, interviews, and subsequent verification. Through online transfers, people often get approved loan amounts in their specified bank accounts.

Automatic Payment of Credit Card Payments from Your Bank Account

Automatic payment of credit cards keeps you away from unnecessary and prevents the possibility of late fines. Just request the banker to set the automatic credit card payments on a specified bank account (in which you are likely to get an instant loan online.) The pending amount will get deducted from the bank account, and you will receive email & SMS notifications for the same.

Conclusion

Using a credit card will help make necessary purchases and pay essential bills when you are out of cash (mainly at the end of the month). But reckless use of credit cards often piles up debt. With limited monthly income and many financial commitments, people often find it challenging to clear credit card payments. In addition, there are negative consequences of skipping credit card payments. So, don’t take unnecessary risks and resort to personal loans for salaried. With easy eligibility criteria and simple terms & conditions, most people get an instant loan online. They can use the borrowed money to clear all pending credit card payments, improve credit scores and stop legal actions against you.