As the name suggests, debt consolidation is the process to consolidate all the debts or loans into one simple, easy-to-manage loan. In simple terms, you only have to deal with one set of interest rates, fees, and repayments, no matter how many debts you’re currently holding. You will regain control of your payments and shorten your timeline to a debt-free life with a debt consolidation service in the UAE.
Debt consolidation has helped many people in managing their finances. But, whether it’s the right thing for you or not depends on different factors. The factors are benefits, your eligibility, and the need for debt consolidation service.
What Benefits Will You Get With Debt Consolidation?
- The service will improve your credit rating/score as you will make regular payments over several months or years. So, you will see significant improvements in your score without taking any other major steps.
- The debt consolidation will reduce monthly payments as all the debts will be under the same interest rate. You will eliminate high-cost debts and make progress on your principal amount.
- The debt consolidation service is affordable compared to multiple debt loans. Some lenders even provide rate discounts.
What Are Your Needs For Debt Consolidation?
People apply for debt consolidation loans to set themselves free from multiple debt amounts. But, sometimes, this doesn’t work in their favor. And it’s because they don’t identify the actual need and their future plans.
- You should look for a debt consolidation service in the UAE only if you know for certain that you will not entertain debt in the future. In other words, debt consolidation is right for you if you won’t take out more debt or rack up your credit card bills during or after consolidation.
- If you can meet all your monthly payments, debt consolidation is a great option for you. Missing the monthly payments cause more significant problems, affecting the credit score and progress on the current debts.
- If you are capable of paying off all your debts in 12 months or less, you don’t need a debt consolidation service. You can get over all your debts just by following a strict budget or eliminating the smaller debts quickly.
What Makes You Eligible For Debt Consolidation?
- You are eligible for debt consolidation service if you get a lower interest rate than what you already have on your debt. But, this point won’t be applicable if your credit score has improved since you took out your previous loans.
- You are eligible if you have a steady income that allows you to make monthly payments. You should be comfortable covering repayments with some extra to spare to become eligible.
- You are eligible if your debts don’t exceed 50% of your household income. If debts are higher, you should look for alternative methods of repayment.
- You are eligible if you can pay off a debt loan amount in five years or less and avoid making repayments forever. This plan will let you see success even faster.
Debt consolidation service is a savior for you. But, still, you should think twice and analyze your financial condition before applying for the same.