{"id":947,"date":"2020-07-10T12:06:05","date_gmt":"2020-07-10T08:06:05","guid":{"rendered":"https:\/\/moneymall.ae\/credit-blog\/?p=947"},"modified":"2020-07-11T21:32:23","modified_gmt":"2020-07-11T17:32:23","slug":"debt-consolidation-with-a-personal-loan-pros-and-cons","status":"publish","type":"post","link":"https:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/","title":{"rendered":"Debt Consolidation With A Personal Loan: Pros and Cons"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Personal loans are a sought after product due to their ability to fund various expenses. While for some it may be medical expenses, others might need it for miscellaneous expenses such as buying a car or moving into a new home. But a very useful feature of a personal loan is the ability to consolidate debts. Continue reading\u2026<\/span><\/p>\n<p><em><strong>Read More:-\u00a0<a href=\"https:\/\/moneymall.ae\/credit-blog\/5-crucial-life-situations-that-a-personal-loan-can-help\/\">5 Crucial Life Situations That A Personal Loan Can Help You With<\/a><\/strong><\/em><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_79 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a23421f4ee8b\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a23421f4ee8b\"  aria-label=\"Toggle\" \/><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:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/#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:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/#What_are_the_ways_to_consolidate_debt\" >What are the ways to consolidate debt?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/#How_can_a_personal_loan_help_in_debt_consolidation\" >How can a personal loan help in debt consolidation?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/#Pros_of_debt_consolidation_with_a_personal_loan\" >Pros of debt consolidation with a personal loan<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/#You_could_reduce_your_interest_rate\" >You could reduce your interest rate:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/#You_could_lock_in_a_low_rate\" >You could lock in a low rate:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/#You_will_have_a_fixed_repayment_timeline\" >You will have a fixed repayment timeline:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/#You_could_boost_your_credit\" >You could boost your credit:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/#Cons_of_debt_consolidation_with_a_personal_loan\" >Cons of debt consolidation with a personal loan<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/#You_may_pay_a_higher_rate\" >You may pay a higher rate:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/#You_could_end_up_paying_more_interest\" >You could end up paying more interest:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/#You_could_have_to_pay_fees\" >You could have to pay fees:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/#You_could_end_up_deeper_in_debt\" >You could end up deeper in debt:<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n\n<p><a href=\"https:\/\/moneymall.ae\/credit-blog\/debt-consolidation-with-a-personal-loan-pros-and-cons\/debt-consolidation\/\" rel=\"attachment wp-att-948\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft wp-image-948\" src=\"https:\/\/moneymall.ae\/credit-blog\/wp-content\/uploads\/2020\/07\/debt-consolidation.jpg\" alt=\"\" width=\"400\" height=\"253\" \/><\/a><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_is_debt_consolidation\"><\/span><b>What is debt consolidation?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The term debt consolidation refers to the act of taking out a new loan to pay off other liabilities and consumer debts, generally unsecured ones. Multiple debts are combined into a single, larger piece of debt, usually with more favourable payoff terms. Favourable payoff terms include a lower interest rate, lower monthly payment, or both. Consumers can use debt consolidation as a tool to deal with student loan debt, credit card debt, and other liabilities.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_are_the_ways_to_consolidate_debt\"><\/span><b>What are the ways to consolidate debt?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">There are several ways you can lump your debts together by consolidating them into a single payment. Given below are a few of the most common:<\/span><\/p>\n<ul>\n<li><b>Personal loans <\/b>are <b><span style=\"font-weight: 400;\">used to consolidate credit card debt are a way of turning multiple balances into a single monthly payment. These loans, which don\u2019t require collateral, are available through banks, credit unions and a variety of online lenders. They give those with less than sterling credit scores a chance to convert revolving debt into a fixed monthly payment at somewhat lower interest rates.<\/span><\/b><\/li>\n<\/ul>\n<ul>\n<li><strong>Credit cards, <\/strong><span style=\"font-weight: 400;\">Another method is to consolidate all your credit card payments into a new credit card. This new card can be a good idea if it charges little or no interest for a set period of time. You may also use an existing credit card&#8217;s balance transfer feature\u2014especially if it offers a special promotion on the transaction.<\/span><\/li>\n<li><strong>Home equity loans (HELOCs) <\/strong><span style=\"font-weight: 400;\">are another form of consolidation. Usually, the interest for this type of loan is deductible for taxpayers who itemize their deductions.<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"How_can_a_personal_loan_help_in_debt_consolidation\"><\/span><b>How can a personal loan help in debt consolidation?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Let us say that you have outstanding dues on multiple credit cards that are attracting a very high rate of interest, plus an existing high-interest personal loan. In such a case, it would prove meaningful to consolidate all the debt into one personal loan. To do so, avail a fresh personal loan from a bank that offers a lower interest rate. Use this loan to repay the credit card dues\/other loans where you are bearing a high-interest cost. Also, make sure the new loan has beneficial features such as flexible repayment tenure, zero-prepayment charges, and zero foreclosure charges. This will make the process easy for you.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Pros_of_debt_consolidation_with_a_personal_loan\"><\/span><b>Pros of debt consolidation with a personal loan<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">There are several benefits to using a personal loan to consolidate debt, such as:<\/span><\/p>\n<ul>\n<li>\n<h3><span class=\"ez-toc-section\" id=\"You_could_reduce_your_interest_rate\"><\/span><b>You could reduce your interest rate: <\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/li>\n<\/ul>\n<p>Personal loans can have lower rates than other kinds of debt. If you can qualify for a low-interest personal loan and reduce your rate, you\u2019ll save yourself money on loan repayment.<\/p>\n<ul>\n<li>\n<h3><span class=\"ez-toc-section\" id=\"You_could_lock_in_a_low_rate\"><\/span><b>You could lock in a low rate: <\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/li>\n<\/ul>\n<p>Sometimes when you borrow money, your interest rate is variable. This means that it is linked to a financial index, such as the prime rate. If the index rate goes up, your rate typically goes up too. If you are tired of owing money at variable rates, you could get a fixed-rate consolidation loan so that you will know exactly what your monthly payment will be each month.<\/p>\n<ul>\n<li>\n<h3><span class=\"ez-toc-section\" id=\"You_will_have_a_fixed_repayment_timeline\"><\/span><b>You will have a fixed repayment timeline: <\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/li>\n<\/ul>\n<p>When you take out a personal loan, you agree to repay that loan on a set schedule specified in your loan agreement. Since you\u2019ll have your loan term going in, you\u2019ll know exactly when you\u2019ll become debt-free if you pay on time. Be aware that if you want to pay off your loan early, your lender may charge a prepayment penalty.<\/p>\n<ul>\n<li>\n<h3><span class=\"ez-toc-section\" id=\"You_could_boost_your_credit\"><\/span><b>You could boost your credit: <\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/li>\n<\/ul>\n<p>Your credit scores are based on a number of different factors, each with a different weight. For instance, if you are unable to pay your credit cards on time, that can negatively affect your payment history, which is an important factor. If you max out your cards, that can hurt your credit utilization rate. A lower utilization rate could help your credit scores. Thus, consolidating your debt with a personal loan could help your credit scores if it leads to a lower credit utilization rate and more on-time payments.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Cons_of_debt_consolidation_with_a_personal_loan\"><\/span><b>Cons of debt consolidation with a personal loan<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">There are some potential disadvantages to consider before you decide to use a personal loan to consolidate your debt. Here are some of them:<\/span><\/p>\n<ul>\n<li>\n<h3><span class=\"ez-toc-section\" id=\"You_may_pay_a_higher_rate\"><\/span><b>You may pay a higher rate: <\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/li>\n<\/ul>\n<p>There is no guarantee a personal loan will definitely have a lower interest rate than all the debt you pay off. If you consolidate any debt with a lower interest rate, you\u2019ll raise the costs of repaying it. Use a debt repayment calculator to compare any potential savings.<\/p>\n<ul>\n<li>\n<h3><span class=\"ez-toc-section\" id=\"You_could_end_up_paying_more_interest\"><\/span><b>You could end up paying more interest: <\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/li>\n<\/ul>\n<p>Even if you lower your interest rate, there\u2019s a chance your personal loan could cost you more if you stretch out your repayment period for too long. If you use a personal loan with a five-year repayment term when you\u2019d otherwise have repaid the debt in two years, you\u2019ll pay interest for three years longer. This could mean you\u2019ll pay more interest over time, depending on your loan\u2019s interest rate.<\/p>\n<ul>\n<li>\n<h3><span class=\"ez-toc-section\" id=\"You_could_have_to_pay_fees\"><\/span><b>You could have to pay fees: <\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/li>\n<\/ul>\n<p>Sometimes you have to pay to take out a personal loan. Depending upon your lender, you could end up owing application fees, origination fees or prepayment penalties if you pay off your loan early. These fees sometimes make consolidating your debt more costly than just continuing to pay back your current lenders.<\/p>\n<ul>\n<li>\n<h3><span class=\"ez-toc-section\" id=\"You_could_end_up_deeper_in_debt\"><\/span><b>You could end up deeper in debt: <\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/li>\n<\/ul>\n<p>When you pay off credit cards using the proceeds of a personal loan, you free up your line of credit. If you use these cards again and can\u2019t pay off the balance, you could end up owing your original creditors again. But if this scenario occurs, you would have to pay off your consolidation loan, as well as a bunch of new debt, leaving you in worse shape.<\/p>\n<p><span style=\"font-weight: 400;\">There are a number of banks and financial institutions in UAE that offer personal loans for debt consolidation. These lenders charge a reasonable rate of interest and offer flexible terms that can make it easy for you to repay the borrowed sum. Ensure that you check your personal loan eligibility and credit score before approaching a lender for a personal loan.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Personal loans are a sought after product due to their ability to fund various expenses. While for some it may [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":948,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[3],"tags":[275,276,277,281,278,279,280,158,282],"class_list":["post-947","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-personal-loans","tag-debt","tag-debt-consolidation","tag-debt-consolidation-dubai","tag-debt-consolidation-loan","tag-debt-consolidation-loan-uae","tag-debt-consolidation-loans","tag-debt-consolidation-loans-uae","tag-debt-relief","tag-meaning-of-debt"],"_links":{"self":[{"href":"https:\/\/moneymall.ae\/credit-blog\/wp-json\/wp\/v2\/posts\/947","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/moneymall.ae\/credit-blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/moneymall.ae\/credit-blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/moneymall.ae\/credit-blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/moneymall.ae\/credit-blog\/wp-json\/wp\/v2\/comments?post=947"}],"version-history":[{"count":10,"href":"https:\/\/moneymall.ae\/credit-blog\/wp-json\/wp\/v2\/posts\/947\/revisions"}],"predecessor-version":[{"id":986,"href":"https:\/\/moneymall.ae\/credit-blog\/wp-json\/wp\/v2\/posts\/947\/revisions\/986"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/moneymall.ae\/credit-blog\/wp-json\/wp\/v2\/media\/948"}],"wp:attachment":[{"href":"https:\/\/moneymall.ae\/credit-blog\/wp-json\/wp\/v2\/media?parent=947"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/moneymall.ae\/credit-blog\/wp-json\/wp\/v2\/categories?post=947"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/moneymall.ae\/credit-blog\/wp-json\/wp\/v2\/tags?post=947"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}