Handling several loans from different entities can be challenging, especially if the loan payment dates are scattered throughout the month. Debt consolidation simplifies everything by combining your loans into one to two payments per month, which alleviates much of the burden of monitoring debts. In this article, we will review the process of debt consolidation and how it can enhance the financial strength of your business.

What is Debt Consolidation?

Debt consolidation is the process of combining your loans and turning them into one to two loans, thus streamlining the payment process. A good example is a business that borrowed from multiple banks. Each bank has its own payment schedule. With debt consolidation, instead of weekly or frequent payments to different banks, you are only focused on a single payment for every one to two loans.

This technique not only makes the process easier, but it also reduces the amount of stress one goes through while improving their cash flow. Let us closely examine this further.

Benefits of Debt Consolidation

Reduced Interest Rates

A lot of businesses initially apply and secure loans at varying interest rates, most of the times reaching up to twenty-one percent. With debt consolidation, you are able to combine the loans and achieve a greatly reduced interest rate of around ten to twelve percent.

Flexibility With Loan Terms

While consolidating your debts, you get the chance to extend the repayment period. Relocate to a new lender and negotiate new terms that suit your cash flow situation.

Better Cash Flow

A lesser degree of loans to manage translates to a smaller number of deadlines to observe. Instead of repaying multiple loans, you can shift your focus to two or three payments a month and thus, improving your cash flow.

Peaceful Payments

Post debt consolidation, there is no need to worry about daily or weekly payments. As a result, financial planning becomes easier so you can focus on growing your business.

When To Consider Debt Consolidation

When looking to manage debts arising from unsecured loans, debt consolidation is useful. For example: – Credit card debt – Loans from banks, NBFCs – Fintech loans with exorbitant interest rates

Secured loans come with collateral such as houses or cars, making them ineligible for consolidation. Only unsecured debt is eligible for consolidation.

How To Consolidate Your Debt

Writing Down Your Debts Start with the loan that has the heighest interest. That way, you end up with the most efficient payment plan.

Observe Loan Amounts and Monthly Payments

Understand the total loan amount and the period in which each loan is to be paid back. This will allow you to assess if your financial obligations are reasonable and if there is a need for consolidation.

Review Commercial Movements

Analyze your monthly income against the outflow. To illustrate, if your income is Rs. 50 lakhs and your EMIs are Rs. 60 lakhs, you can save cash through consolidation. A reduction in your EMI to Rs. 40 lakhs will generate an additional Rs. 10 lakhs in cash to invest towards expanding the business.

Talk To The Bank

Talk to the bank that currently has the financial records. They should be able to assist with consolidation and help obtain a loan at more favorable conditions.

Make Sure All Loans Are Settle

Ensure that all outstanding loans have been serviced and pay the required fees for an NOC or No Dues Certificate from the lending institutions.

Avoid Non-Payment Of Consolidated Loan Amounts

Expend the payment of supplier invoices as it relates to consolidated expenses. After loan consolidation, honor the consolidated loan payment plan.

The primary objective of debt consolidation is to combine your loans in one or two payments so that your stress is reduced. This will also improve your cash flow.

The primary benefits that one can gain from consolidation are a lowered interest, flexible terms on the loan as well as better control over payments.

To achieve a successful consolidation, you need to list your debt obligations, your cash flow and consult with your bank.

All your debt obligations can be managed more effectively which in turn will enable you to focus on growing your business. Organize your debt obligations today and take your first step towards conquering your financial future.