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Different Types Of Business Loan

What is a business loan? A business loan, in simple terms, is the capital provided by a lender to a business owner. A lender can be a bank or any NBFCs in India and a business owner could be anyone looking to start a new venture or planning to expand their existing business. These loans are available for all kinds of businesses ranging from a self-employed person to a private company. A business loan is also known as a commercial loan and can aid in taking care of the cash flow requirements of your business, growing your existing business, upgrading your machinery, or renovating your place of business. [B-01] Types of Business Loans There are several business loans available in the market which you can avail of based on your business needs. Some of them are listed below. Working Capital LoanAs the name suggests, this type of business loan is required to meet the day-to-day capital requirements of a business. A working capital loan can help with several business-related needs such as maintaining adequate cash flow, purchase of additional inventory, payroll costs, etc. It is a short-term business loan and comes in handy when you need to meet the cash flow requirement which may arise due to the delay between the payables and receivables. Term LoanA term loan can be short-term or long-term. These business loans need to be repaid in a set period of time. The loan amount sanctioned by a lender is usually dependent on the creditworthiness of the borrower’s business. The loan could be secured or unsecured in nature. A term loan repayment duration can range from 12 months to over 10 years depending upon the borrower’s requirement and repayment capability. Letter of CreditA letter of credit is a payment instrument in which a lender provides a guarantee of funds to businesses that deal in international trading. It is primarily used by enterprises that are involved in the import and export of goods overseas. One of the major concerns of doing business overseas is the payment assurance from unknown suppliers. A letter of credit from the lender comes in handy in such situations and provides assurance of payment to the suppliers or exporters before they perform any transactions. Equipment FinancingBuying new machinery or upgrading existing ones can be an expensive affair for businesses involved in manufacturing. Equipment financing is a funding option provided by a lender to upgrade or buy a piece of machinery. Also known as a machinery loan, an equipment financing option helps the borrowers to meet the fund’s requirement of a business arising from the need for new machinery. Merchant Cash AdvanceA merchant cash advance or a point-of-sale loan is a financial solution for SMEs to deal with a liquidity crunch. A cash advance is provided by the lender for which the repayment is done based on daily sales through the card terminal. This type of business loan is usually provided to the borrowers who use the POS terminals for customer payments. How to Get a Business Loan A business loan can be easily availed online through various financial institutions. But before applying for a loan you need to understand the requirements and accordingly figure out the appropriate loan for your business. Whether you’re just starting a business or looking to meet your day-to-day capital requirements or wish to grow your existing business, refer to the types of loans listed above while finalising the business loan you need as per your fund requirements. All you have to do is check with your lender or visit their website and fill out a business loan application form online. If you are eligible for the loan, most financial institutions these days sanction loans within few days and require minimal paperwork. [B-02] Bottom Line Capital is the lifeline of every business and a business loan provides entrepreneurs with easy access to capital. It is crucial to identify the business needs and the nature of credit when deciding the type of business loan you wish to apply for. Business loans are available at flexible EMIs and nominal interest rates. Be it a big or small business, there is a business loan out there that is designed to fulfil your financial needs.

08-11-2023

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Difference Between Secured And Unsecured Loans?

The two most common types of loans people take out are personal and business loans. They are both intended for different purposes, have different borrowing limits, and have other associated terms and conditions, one of the chief ones being secured or unsecured. Let us examine their definitions and critical differences between secured and unsecured loans. What is a Secured Loan? As the name suggests, secured loans are provided by banks and non-banking financial companies (NBFC) instead of some collateral that the borrower needs to put up as security. This collateral can be a new item purchased, with ownership rights in the lender's name, until the amount is repaid, such as a car, house, or shop. In other cases, it could be an existing security owned by the lender. These securities can be shares, stocks, gold, property, etc. Several financial institutions have many such secured business loan products available in their portfolio, such as home equity lines of credit, loans against property, loans against securities, and gold loans. Secured business loans are the most common method of availing business loans. This is because, typically, larger sums need to be borrowed, which requires the lending institution to safeguard its interests by requiring the borrower to put up collateral. These also involved longer repayment terms and competitive interest rates. Be cautious; a secured loan entails that in case of defaulting in payment or reneging from the repayment contract, the lender will have the right to sell off the collateral to compensate for their losses. [B-02] What is an Unsecured Loan? Unlike secured loans, unsecured loans do not require collateral or security on the borrower's part. From a lender's perspective, these loans are riskier regarding repayment and the credit risk of defaulting. Unsecured business and other unsecured loans come with higher interest rates and shorter repayment tenures to offset this risk. The borrowing limits are also lower, as lenders wish to lend large amounts only after receiving security in return as assurance. However, it is different from lenders unquestioningly providing unsecured loans. Certain factors come into play during the borrowers' financial assessment, such as the credit score, risk profile, past track record, payment history, current income, existing debts, etc. The borrowing limit, interest rate, and repayment tenure are locked based on a combination of these factors. Some typical examples of commonly occurring unsecured loans are credit cards, personal loans, and student loans. In Summation To summarize what we have discussed above, the critical difference between an unsecured and a secured loan is the requirement of collateral for securing the loan. In the case of secured loans, some sort of tangible collateral needs to be temporarily owned by the lender. This is why most business loans are secured loans. Due to the assurance with the lender, collateral allows for higher borrowing limits, better rates, and longer repayment terms. In case of non-repayment, the lender has the right to liquidate the security or collateral and balance the originally lent amount. Business loans may also be taken as secured loans, but the amount might be low and the interest rate high. Overall, there are better options than this. On the other hand, personal loans are frequently unsecured and offered based on the borrower's credit rating and financial history. Due to the reasons above, secured loans are easier to obtain and offer more benefits to the borrower; however, this largely depends on your individual needs and requirements. It also depends on your ability and willingness to put up collateral in return for the loan. In the case of smaller amounts intended for personal use, unsecured loans might be more apt. Visit your preferred lender's website to compare the terms and rates before deciding.

08-11-2023

Tips & Advice

Why Is Early Payment Crucial For Recovering Small Businesses?

Covid pandemic has spared none in the world! The strict curfew laws and lockdown regulations turned everyone’s lives around. However, one sector that was badly affected was the MSME sector. It was reported in a recent survey that more than three-fourths of the country’s small businesses had an adverse effect after the first lockdown was imposed. In addition, most of the small businessmen, majorly manufacturers, blamed the lack of finances for disrupting their supply. Funds and supply solely depend on each other to efficiently manage the supply chain system. However, the cruel pandemic has drained all the cash flows from the markets and troubled sellers and buyers. Small businesses would need working capital to recover from the losses, which can be availed through invoice discounts and supply chain financing. These are similar to small business loans but have lower repayment periods than the latter. Supply chain finance is a set of tech-based financing solutions in which a third-party financer clears the seller's invoices on behalf of the buyers. This helps the seller have enough working capital and also gives the buyers time to clear their payments. This financing solution has benefits and no losses for both parties and thus, it is an effective way to recover from a debt trap. There are enormous benefits of having an early payment made as of course, you have those extra bucks to spend on your business in a much better way. The importance of early payments can be better understood through the following points: Helps the brand grow: A company with insufficient funds struggles to keep its position intact in the market. However, with the early payments made, enough working capital can be availed by the small businesses that can further help them improve their management and look for better opportunities. Let us see how: The funds can be used towards market research to expand the business and improve the product for its potential audiences. The money can be invested in the company’s human resources department to appoint the best talent. Offering employees better perks and job security will ultimately improve the business. High-level marketing techniques can take the product to a different level and increase its sales if invested. It can improve the quality of products and services, enhancing the brand’s goodwill. Strengthens relationships: Like a chain reaction, all business entities are interdependent on payments and supplies. However, difficult times often create unprecedented situations wherein you might not be able to pay your suppliers, stakeholders, or lenders on time, ultimately leading to trust issues. With enough working capital, you can keep your relationships strong with your suppliers by paying them on time. This may come in handy in the future, where if you need a favour, your good impression will get you one! Help keep your employees loyal: Employees are the valuable assets of any small or big company, and what’s better than a loyal workforce? Sharing your profits with your workforce is the best thing you can do to make your employees loyal to your company. Paying them timely, introducing special bonus programs, and hosting award ceremonies and seminars will motivate them and make them choose you. You can do all of these when you have sufficient funds. Helps with collateral-free business loans: Often, loan providers ask for collateral to provide a secured business loan that smaller business people with fewer assets cannot afford. Supply chain finance offers unsecured business loans to companies at competitive rates. Therefore, any legal business entity can easily apply for a small business loan. [B-02] Conclusion The pandemic hit small businesses that are still struggling to recover, but this is easily possible with early payments. Working capital is the crucial element of any company that controls all its day-to-day activities. Supply chain finance offers credit facilities and keeps the supply chain management moving.

08-11-2023

How To?

A Complete Guide To Real Estate Financing

Today in India, a lot of people are still unaware of the perks of real estate investment. Using real estate as an investment strategy has a lot of potential. Amongst investors, it continues to be a popular strategy to grow wealth. But for beginners looking to get into real estate financing, learning a little about the different aspects can be helpful. There are different options for real estate financing. They have their pros and cons that everyone should know about. So, read on to learn more about real estate financing and its importance. [B-01] What is real estate financing? Real estate financing involves several methods used by investors to secure funds for their forthcoming deals. Investors usually secure their capital from an outside source to buy and renovate a property. Real estate investment options A common misconception about real estate investing is that you need a lot of initial money to get going. However, that is not true. Buying real estate isn’t an inexpensive affair. The truth is that there are many different financing options available to fund your investment. As an investor, the method you choose to fund your investment will determine the financial outcome. There are different financing options available. Though all these real estate financing options are equally created, they give different outcomes for everyone. Here are some of the possible financing options available in India. Conventional bank loansConventional bank loans are one of the most preferred real estate financing options amongst investors. Banks offer a certain amount of loan to the borrower, and it needs to be repaid in EMIs. The bank usually offers about 60 to 90% of the total valuation of the property as the principal amount. The rest of the money has to be paid as down payment.The biggest advantage of conventional loans is that they have a long repayment tenure of 20 to 25 years. So, you can pay monthly EMIs for a long period of time. Over this period of time, the value of the property keeps increasing. Thus, the borrower ends up incurring gains. These bank loans also have low interest rates and minimal processing fees. Mortgage loansWhile a conventional bank loan is not secured by a collateral, mortgage loans are. Instead of paying for a property with cash, real estate investors can apply for a mortgage. They can use the mortgage to obtain funds from the bank and use it to purchase the property. The mortgage will act as a security in case the borrower fails to pay back the loan. There are different types of mortgages and you can inquire with your bank about the details. Hard money loanHard money loans are ideal for investors who don’t have a good enough credit score to borrow from a bank. These are loans given out by private lenders for a short period of time. One of the biggest advantages of these loans is that they are solely backed by the value of the property. Hence, in a way, you are not personally liable for loan repayment.In case you want to secure long-term financing but need emergency cash, hard money loans can be useful to get immediate funding. Real Estate Investment Trusts (REITs)REITs are companies that allow investors to invest in big, income-producing real estate. Investors can invest in REITs by buying shares via a broker. REITs operate and own real estate across a range of sectors. They are publicly traded on the stock exchange. The individual investors have potential to gain from the dividends. Thus, REITs are a way of real estate investing without actually having to buy a property yourself. OtherOther than banks, mutual funds and REITs, investors can also arrange capital through credit unions, finance companies, pension funds etc. [B-02] Importance of real estate financing Here are some reasons why you should consider real estate financing. Prime real estate will never lose its demand. Thus, it is a much safer investment option compared to some other volatile options. According to experts, the real estate industry is currently booming. With profits doubling every year, this is the perfect time to invest in real estate

08-11-2023

Tips & Advice

Signs Which Indicate That You Are Getting Into A Debt Trap

Remember the fable of a frog that boiled itself to death after falling into a pot of water? The water was pleasantly warm when the frog fell in, but the amphibian simply adjusted its body temperature to stay inside. When the water reached its boiling point, the frog could neither manage its body temperature nor jump out successfully. Same is the case with a large section of people who fall into a debt trap without realising it. Like slow poison, it erodes their quality of living and peace of mind. [B-01] What is Debt Trap? Typically, a debt trap is the result of mindless borrowing without checking if one has the ways and means to repay it. Loans are the easiest tools at common man’s disposal to fulfil his dream of buying a house or car, or to meet medical expenses. As such, debt is unavoidable for most people. But debt trap is something that everyone should be wary of. Let us look at some warning signs that indicate a person is falling into a debt trap. Too many loans: You have too many EMIs to pay throughout the month on several loans you have taken. The risk of defaulting on repayment is high, and it will have a cascading effect if missed. If more than half of your monthly income goes out as loan repayment, you are in a debt trap. EMIs are not the only villains. Generally, if your monthly expenses, say utility bills and house rent, take up more than 70% of your earnings, your chances of falling into a debt trap are high. Such expenses should not cost more than 50% of your income. And if you do not have the money to pay your utility bills, it is a sure-shot sign of gliding into a debt trap. Betting on future income: If the thought of festive discounts and sales thrills you to such an extent that you decide to opt for a loan with an EMI that only a revised salary can pay for, then debt trap is nearby. What would happen if you lost your job or did not receive the expected increment? Also, there are loan products whose EMIs increase after a few years. Such interest rate spikes can lead to almost 20% rise in EMIs, which monthly salaries alone would not be able to offset. So if you do not have other income sources and are still gung ho about future income-based borrowing, your chances of getting into a debt trap is high. Borrow to meet daily needs/pay EMIs: If you do not have any money left in your bank account and have missed EMIs, you have no choice but to borrow from relatives or friends. Banks won’t lend anymore as you have a poor credit score, but NBFCs might lend you cash at a higher interest rate. This would only make you fall deeper into the debt trap. Credit cards: The cash advance fee on cash withdrawal using a credit card comes to 2.5% to 3.5% of the transaction amount per month. If credit card payments are put off by paying the minimum due amount, which in fact is quite low, your repayment capacity would be severely reduced by the high-interest rates. If the credit card limit is exceeded, it is high time you track your finances. [B-02] Debt Consolidation Loan While lifestyle changes and finding new ways of income can save you from the debt trap, the most important step is to take a debt consolidation loan. For that, all outstanding loans and their interest rates should be calculated, and a lower-cost personal loan that can clear all of them should be taken. A debt consolidation loan allows you to focus on paying only one pending loan. A debt consolidation loan also reduces your chances of missing a payment or making a late payment and may improve your credit rating. Professional loans are the best way to make a new start for working professionals who have fallen into the debt trap. Professional loans offer competitive interest rates and are priced better than personal loans. What matters most is making the right choices to live a debt-free life.

08-11-2023

Tips & Advice

Personal Loan Vs Business Loan Which Is Better

What is a Personal Loan? A personal loan in simple language is an easy to obtain all-purpose loan. Unlike a business loan, a personal loan has flexible end-use and is not restricted to business-related expenses only. It is an unsecured loan that can be used for a variety of reasons without any collateral provided as security against it. Whether it is a medical emergency, a long vacation, a wedding, or funds needed for a business, a personal loan can help you with the required capital to deal with these unexpected as well as planned expenses. A personal loan is an instant approval loan that requires minimal documentation and can be availed by an individual to meet personal and business needs. [B-01] What is a Business Loan? A business loan or a commercial loan can be secured or unsecured in nature. The loan amount sanctioned under a business loan can only be used for business-related expenses. A business loan funds various aspects of business such as expanding your existing business, addressing the cash flow issues, buying or upgrading machinery, or renovating your place of business. Several business loans are available in the market and can aid in fulfilling the capital requirements of a business owner. Personal Loan Vs Business Loan Loan Approval ProcessA loan approval process for a personal loan is much easier and quicker as compared to a business loan. If you are a business applying for a personal loan, you need to ensure an adequate debt-to-income ratio. If you are an individual with a good credit score and a steady flow of income, a personal loan can be approved and disbursed within a day.However, the business loan application and review process can be time-consuming as you may have to furnish a lot of documentation to the lender. In the case of a business loan, the primary focus is on the business instead of the individual applying for the loan. If you have just started your business you might find it a bit difficult to get a business loan. So when it comes to the loan approval process, the personal loan has an upper hand because of the ease with which one can get it. Interest RateA personal loan as the name suggests is primarily designed to meet your fund requirements arising from personal needs such as a medical emergency, home renovation, wedding, etc. Since there is no mortgage as collateral with the lender for a personal loan, the interest rates are higher as compared to a business loan. A personal loan for a business might not be an ideal choice because the higher interest rates can impact the business’ cash flow. Hence, if the purpose of the loan is to meet the business expenses, it is prudent to prefer a business loan over a personal loan. Tax BenefitsInterest paid for a business loan is tax-deductible in India as per the Income Tax Act of 1961. There is no tax exemption or tax deduction for a personal loan. Funds UsageA personal loan is a multipurpose loan without any restriction from a lender on the usage of the loan amount. However, a business loan is strictly limited to cater the business expenses. For a business loan, a borrower has to substantiate the reasons before the loan approval as to how and where they intend to use the loan capital. Loan TenureA personal loan is a short-term loan where the loan is offered for a maximum of 5 years by the lender. On the other hand, a business loan can be both short-term and long-term depending upon the fund requirements and repayment capability of the borrower. [B-02] Bottom Line At the end of the day, choosing between a personal loan and a business loan is dependent on the requirement of the borrower. If the motive is to meet the business expenses then a business loan with its benefits of lower interest rate, higher loan amount, and tax benefits makes more sense. But if you are in urgent need of capital to meet your fund requirements that go beyond business expenses, a personal loan with an easy application process and instant approval would be a good option for you.

08-11-2023

Tips & Advice

How Does Getting A Machine Loan Can Help You Grow Your Business?

For better sales and steady growth, as a businessperson, you need to have the right machinery. Irrespective of your industry, the machines you use have to be at par so that you can warrant maximum production and profit. With the help of the latest technologies, your machinery increases the production many folds and helps reduce the cost of labour/workforce and improve the overall efficiency. [B-01] Worn-down machinery or the necessity of a new one may often require capital financing. In such a scenario, if you need capital loan finance, there are many options that can help you in dealing with insufficient funds. Machinery loans can be taken in the form of a small business loan as well. To further boost the booming economy, the government has introduced several capital financing schemes that can greatly help small to medium businessmen. Let us take a look at the highlighting features of small business loans: 1. Pocket-Friendly Rates Facing financial issues can be detrimental to your business. In such a time, getting a capital loan at affordable prices can be a blessing. 2. Freedom to Choose Most banks offer capital loan finance to small businesses allowing a lot of flexibility in loan repayments, tenures, pre-payments etc. 3. Unsecured Capital Loans There are banks that allow certain small loan amounts to start-ups and small businesses without collateral. 4. Ease of Online Banking For a businessman, time is money. And you save a lot of it with online transactions. Online banking also makes money transactions simpler, quicker and convenient. Now let us take a look at the different working capital loan options that are available: 1. Credit Guarantee Fund Government Business Loan Scheme Credit Guarantee Fund Government Business Loan Scheme, CGTMSE, is probably the most suitable capital loan scheme for MSMEs. While offering collateral-free loans, you can avail of the loan through an authorised rural bank or commercial bank. The loan amount can go up to INR 10 lakhs, and above depending on the eligibility. 2. MUDRA Loan Created to offer capital loan finance opportunities to non-corporate, non-farm micro/ small enterprises, MUDRA loans can be taken from almost all kinds of banks in the private and the public sector including rural banks, corporate banks and small finance banks. To apply for the bank, you can visit the official MUDR website.Here are the eligibility criteria you need to look out for. The applicant: can be a non-corporate small businessman/ proprietor including: Shopkeeper Small manufacturing unit Food-service unit Repair shop Machine operator Food processors and others 3. Credit Linked Capital Subsidy Scheme Another credit scheme by the government aimed at technological upgrades of small businesses. This can be an ideal option for your machinery loan, as it gets you a 15% subsidiary on your eligible machinery investment.For this capital loan finance, you need to apply as a Single proprietorship business Co-operative or public/ private limited company Partnership firm 4. Business Loans by Piramal Finance Limited Getting a business loan has been made simpler and easier by PCHF. Speedy disbursals, minimal documentation along with an efficient and proactive 24X7 customer care, ensure that your working capital loan needs are fulfilled at the earliest. You can apply for your machinery loans up to INR 25 lakhs. An interest rate of 12.5% makes the loan an affordable option.Let us take a look at the eligibility criteria. The applicant: Must be from 21 to 70 years of age Can be either salaried or self-employed [B-02] Conclusion: When you work with machines, you need to be prepared for their natural wear and tear. Working capital loan in the form of a machinery loan can not only help in upgrading and repairing machines, but it can greatly boost the smooth running of your business. So, do not let your production get hindered due to a delayed upgrade of your machine. With the multiple options explained above, make an informed decision about the right capital loan and carve new ways for your company’s success.

08-11-2023

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What Is A Professional Loan?

Working professionals such as architects, chartered accountants, company secretaries, lawyers and doctors are usually looking to expand their services or invest further in their own existing / new practice. Professional loans are targeted at such people to help them meet their ambitions. Through this blog, we shall see the different aspects of professional loans and how to avail them. [B-01] Benefits of a Professional Loan Some of key benefits and advantages of a professional loan are listed below: While there are several secured professional loans which can be obtained by using your property as security, one of the unique benefits of a loan for working professionals is that they can also be availed without putting up any collateral. This is extremely helpful for young professionals who are in the process of setting up their practices. The process is hasslefree and paperless. It can be easily concluded online without the need of complicated documentation, as shall be explained in a later section. The loan approval is very quick and disbursal does not take long either. There are several customized options available regarding prepayment and part payments of the loan amount. Due to the prevalence of several banks and non-banking financial companies (NBFC) in this segment, loan seekers get competitive rates with minimal additional charges incurred. Eligibility Criteria While the eligibility criteria may differ slightly among different lenders, described below are the common factors that most lenders consider in general. The borrower must be a resident of India between the age group of 21 years to 65 years. In case of an existing practice, the minimum income should be Rs.1 lakh per annum. People with 4-5 years of prior experience in their field stand to get better loan amounts. People trying to set up a new practice should possess a professional degree or diploma in their line of work. Documents Required The documentation needed while availing a loan for working professionals is basic and minimal. However, just like the eligibility criteria, the documents required are also bound to vary between different lenders. In order to guide you in the process, here is a list of the most commonly sought documents by the lenders. Identity Proof- PAN Card, Aadhar Card, Passport, Voter ID. Address Proof- Aadhar Card, Passport, Voter ID, Driving License, electricity or telephone bills. Bank Statements for the business / self (including salary slips for salaried people) for the past 6 months. Income Tax Returns and Form 16 for last 2 years In case of existing practice – Profit and Loss statement of the business In case of setting up a new practice – Copies of your professional degrees/diplomas In case of a secured loan – Documentation of the property offered as collateral. How to Apply for a Professional Loan? Armed with all this knowledge, you can now conveniently apply for a professional loan online by following these basic steps: Visit the website of your chosen lender and go to the professional loan application page Carefully and accurately fill the online form with the requisite details Attach the relevant documentation The loan provider will commence the assessment process for the application Once approved, the loan amount will get disbursed in your account within 24-48 hours. [B-02] In Summation Professional loans are customized and tailor made to the specific professional requirements of different categories of salaried or self-employed people. They are easy to procure, require minimal documentation, have competitive rates and can be repaid in convenient and flexible payment plans. Piramal Finance is renowned for its quick and smooth application process, offering maximum borrowing limit based on eligibility, and speedy disbursal to get you started on your professional journey.

08-11-2023

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Why Debt Consolidation Loan?

When it comes to debt consolidation, there are many misconceptions. It is important to understand the different aspects of debt consolidation so that you can plan your finances accordingly and make smarter financial decisions. Making poor financial decisions can lead to bad debt and increased credit repayment amounts that can lead to further debt. It is best to put a halt to this incessant cycle with a single debt consolidation loan. There are many debt consolidation loan benefits. In this article, we will have a look at debt consolidation loans and understand how they can be beneficial when it comes to the repayment of debts. [B-01] 5 Things You Need to Know About Debt Consolidation Loans Before deciding on a debt consolidation loan here are 5 key aspects that you should know. 1. It is Affordable Debt consolidation loans are considered to be affordable as they provide a greater range of flexibility while providing the benefit of nominal interest rates. In addition, it can be less of financial stress to repay a single loan rather than paying several debts that have varying interest rates. With a consolidation loan, you have a range of other benefits such as a unique flexi loan facility with which you can repay interest similar to that of EMIs. 2. Single Debt Agreement A debt agreement is essentially a contractual agreement between the lender of a financial instrument and the borrower. The main terms of this concern determine your ability to opt for additional borrowings. This way, the amount of the debt consolidation has to be used only to repay the outstanding debts that you have. With this agreement, you are also bound to pay your debts in a particular fixed period without any delays. In case of further delays, the debt can lead to the lender charging you with fines and penalties. 3. Does Not Clear Existing Debts It is key to understand that a debt consolidation loan does not reduce your debt obligation. The process of availing a debt consolidation loan does not eliminate your debt altogether. Instead, it makes your repayment process easier. Once you repay all of your existing debt with this loan amount, you will still have to repay the consolidation loan. You can make these repayments as EMIs throughout the tenor or can also choose to repay the entire loan as a lump sum amount. 4. Repay Multiple Debts With One Affordable Loan Usually, the process of repaying multiple debts can be challenging. Some of the main aspects that contribute to this challenge are varying interest rates, managing different streams of repayment, and others. For instance, you could have different credit card bills, home loan repayment, personal loan EMI, and others to repay on a recurring basis. Multiple repayments can also lead to errors leading to you defaulting a repayment. Instead, you can repay all of your debt such as credit card bills and other borrowings using a single debt consolidation loan. 5. Restricts Borrowing More During Consolidation In response to repaying many different streams of debt, it can be common to opt for more credit. Borrowing more debt can only result in a further complicated process of repaying debt. Instead, with a debt consolidation loan, you can opt for one stream of credit and repay several streams of debt. [B-02] In Conclusion Debt consolidation loans have numerous benefits that can simplify the debt repayment process. You can apply for a debt consolidation loan online with minimal paperwork and less hassle. If you are looking to avail of a loan, Piramal Finance can be beneficial. Along with excellent service, you can experience several other benefits such as quick approval and fast disbursal.

08-11-2023