FAQ
1. What is loan consolidation?
Debt consolidation refers to taking out a new loan or credit line to pay off other existing loans and/or credit card outstanding. By combining multiple debts into a single, larger loan, you may also be able to obtain more favourable payoff terms, such as a lower interest rate, lower monthly payments, or both.
2. What types of loans can be consolidated?
Commonly consolidated loans include housing loans, personal loans, car loans, and sometimes other types like credit card debts.
3. How does loan consolidation affect my interest rate?
The interest rate reduces as compared to the existing interest rate which is the weighted average of the interest rates on the loans being consolidated.
4. Can I consolidate just some of my loans?
Yes, It depends on the type of loans. Loans can be consolidated individually or collectively.
5. Are there fees associated with loan consolidation
There are no fees for consolidating loans by us. But Bank may charge fees as per their policy.
6. Does loan consolidation affect my credit score?
Generally, loan consolidation itself doesn’t directly impact your credit score. However, it can positively or negatively affect your credit depending on how you manage the consolidated loan moving forward.
7. Can I consolidate my loans if I’m in default?
You can consolidate defaulted loans with a Consolidation Loan but again it will depends on Bank policy.
8. Can I change my repayment plan after consolidating?
Yes, when you consolidate loans, you can choose a new repayment plan. This could be helpful if you want to switch to an income-driven plan or extend your repayment term.
9. Is loan consolidation the same as refinancing?
No, they’re different. Consolidation is combining multiple loans into one with a new interest rate, usually based on the average of the consolidated loans. Refinancing is getting a new loan with a new interest rate, often from a private lender, to replace your existing loans.
10. How do I start the loan consolidation process?
You can apply here & select the lenders option available for loan.
1. Can I consolidate different types of home loans?
Generally, housing loan consolidation is done for mortgages on the same property. However, if you have multiple properties with mortgages, you may consolidate loans for each property separately.
2. How does housing loan consolidation affect my interest rate?
The new interest rate after consolidation is determined by the lender and is often based on factors such as your credit score, current market rates, and the equity in your home.
3. Are there fees associated with housing loan consolidation?
Consolidation fees vary by lender. Some may charge application fees, appraisal fees, or other closing costs. It’s important to understand all associated fees before proceeding with consolidation.
4. Can I consolidate my housing loan with other debts?
Housing loan consolidation typically involves combining mortgages. If you have other debts, like credit card debt or personal loans, you may consolidate.
5. What are the Factors that determine your Loan getting Sanctioned
1.Credit History
Your credit history is indicative of your future repayment behaviour, based on your pattern in settling past loans. It helps the bank to know if you will be punctual and regular with your payments. Any default or delay in the past is investigated – the longer the delay, the lower your score is likely to be.
Generally, a credit score between 700 and 800 is positive. That means you are likely to be favoured as a safe applicant with a clean history devoid of any repayment defaults. On the other hand, credit score of 300 will increase the likelihood of your application being rejected. Specialised bureaus such as CIBIL, Equifax, CRIF, Experian are sources of credit score that banks seek information from to assess your creditworthiness.
3. Age
Your age matters because it is indicative of your financially stability. You start working in your 20s and by the time you turn 30 you would have five or six years of work experience. So you are financially stable and moving up the proverbial corporate ladder with a better salary. As you progress further in the next 20 or 30-odd years you will have fewer earning years to repay your loans. Therefore, a loan application in your retirement years is likely to be rejected
2. Work experience
Banks weigh your employment history and current engagement to ensure that your source of income is reliable. A bank wants to be certain that your employer is financially sound, with no history of outstanding or delay in paying employees their salaries. Stability of your job matters too. Therefore, government jobs have the added advantage of being perceived as safe compared to lesser known private companies or self-employment.
4. Income
As already mentioned, your income represents your repayment capacity. Banks assess your income capacity in the backdrop of existing debt obligations, dependents, source, and duration. In this context, one of the many things the bank checks is sufficient surplus after EMI payments.
Similarly, many banks prefer applicants who have filed their IT returns and paid tax rather than those who may have filed returns with no tax liability as their income wasn’t taxable. Your eligibility gets better if you can show additional sources of income, such as your spouse’s salary
5. Repayment
If you choose a shorter repayment period, you have a better chance of getting the loan approved. Several banks favour applications for a repayment period of up to five years. As the repayment period increases in five-year slabs – 10, 15, 20, and 25 years – the score reduces. So, keeping it short is the mantra in seeking that approval from a bank for a loan.
7. Margin money
Generally, banks are willing to fund up to 80% of the cost of purpose of the loan and expect the borrower to arrange for the balance. However, if you can put in more than 10-20%, the bank will not stop you. Rather, it will recognise that you are willing to reduce the bank’s exposure to the default risk and approve your application sooner. The down payment you are able to make will have a huge impact on your home, education, car, or business loan eligibility.
6. Collateral
The collateral you provide to the bank while applying could help you secure the loan easier and sooner. As the loan amount is a percentage of the assessed value of the collateral, a high-value asset could mean more credit sanctioned for your use.