The consumer society of today is driven by easy, unsecured, short-term debt, most of which is credit card debt. The Singapore Credit Bureau reveals that 20% of Singaporean credit card users pay only minimum sums on their cards. Lack of proper money management can make matters go out of hand quickly. In such a scenario, taking a personal loan from your moneylender and use that amount to pay off your card debt would be a great idea. Here are some reasons on why you should consolidate your debts with a personal loan.
To improve your credit score
This is the first real benefit of consolidating your debts. Turning revolving debt to installment debt boosts your credit rating, which is important for future credit. If you manage to pay all of your debt using the consolidation loan, the credit score will instantly shoot up. The formula that determines credit score, considers your credit limit in relation to your card balance. However, if your credit score is rather poor, get a personal loan from a licensed moneylender.
Personal loans have reasonable interest rates
You might not mind paying a little extra in interest each month, but over a long period of time it compounds. Compared to the double-digit rates of interest you’re paying, personal loans can have considerably cheaper interest rates. Moreover, by choosing to pay for a personal loan, you will have the convenience of fixed interest rates. If you’re carrying balances on credit cards with variable rates, tracking finance charges becomes problematic.
Personal loans from moneylenders are easier
Being unsecured credit, personal loans can get hard to qualify for, and traditional financial institutions have stringent loan approval requirements. Debt consolidation is not as difficult today, with moneylenders offering personal loans at low interest rates. The process is quick and having a good credit score is not necessary. The verification process is simple and you can get your cash quick. Even foreigners with valid employment permits can get easy personal loans from a moneylender. However, beware of unlicensed lenders or loan sharks.
It prevents further debt accumulation
Dept consolidation does not offer credit facility, and this is important for someone trying to become debt free. These loans are a lump sum which one is obliged to repay in total. Unlike credit cards and overdrafts, where you might go on accumulating more and more debt, debt consolidation offers systematic debt elimination. However, if you need to borrow more while still paying off your personal loan, you can get small payday loans from a licensed moneylender.
It makes you eligible for future borrowing
If you’re still young, chances are that you will need to borrow again in the future. While having a good credit rating is necessary to be eligible for a debt consolidation loan, it also helps with future borrowing. Your credit history should reflect favorably on the state of your finances, if you are to qualify for a vehicle or home loan in the future. Missing payments, making late payments, or having judgments filed against you for bankruptcy can deny you a loan.