By Housing News Desk
February 1, 2024
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It is critical to recognise that failing to make EMI payments on existing loans and accruing credit card debt can increase financial liabilities exponentially. When the interest on numerous bills becomes too much to bear, it is time to consider a personal loan for debt consolidation.
You are called a defaulter if you do not pay your loan EMIs on time. Some loan providers include a ‘grace period’ that begins immediately after your EMI due date. If you do not pay your loan during the grace period, you may be compelled to pay a ‘late payment’ fee to avoid being labelled as a ‘defaulter’. The length of this grace period and the costs charged differ.
If you make an EMI payment after the due date but within your lender’s grace period, you will normally be charged a ‘late fee’ in addition to your EMI amount. If the grace period expires, your lender will charge you as a defaulter and charge you additional fees on the unpaid amount.
If you are behind on your EMI payments, you may see a little or significant decline in your credit score. The issue comes when a person’s credit score is so low that it precludes them from being approved for a personal loan. As a result, they will find it harder to secure loans in the future.
When you apply for a personal loan, you almost always do not need to provide collateral because you have chosen an ‘unsecured’ loan. Loan providers may occasionally request the name of a ‘guarantor,’ whose contact serves as collateral. Defaulting on your EMIs will very certainly place your guarantor in hot water. When you default on a ‘secured’ loan, you forfeit the security you pledged against it.
Personal loans provide borrowers with funds to use at their discretion and are typically unprotected, which means that borrowers are not required to put down security to acquire the loan. This varies from auto loans, in which borrowers must supply collateral—such as their home or vehicle—that the lender can seize if payments are not made.
Personal loans are a convenient solution for borrowers to consolidate past-due payments. Personal loans may have higher interest rates than secured loans, but they frequently have lower interest rates than credit cards. Borrowers can only qualify for cheaper rates if they have excellent credit.
A personal loan can be an alternative for making up missed payments because it allows debtors to pay off their high-interest credit card debt first and then pay off the personal loan at a lower interest rate. If consumers have a considerable number of past-due payments, personal loans are a possible choice. Taking out a personal loan to pay off credit card debt could save you money on interest and help you get out of debt quickly.
Personal loans are simple to obtain and might aid in financial consolidation. Clearing past-due payments rather than avoiding a personal loan when the need arises is a safer option.