We may need to take instant business loans to meet our financial requirements from time to time, and with the credit cards in trend, each of us has our credit card bills to pay as well. So we end up having multiple loans in different forms. It is a challenging task to keep track of all the loans and their due dates because if you fail to pay once, you might end up with a poor CIBIL score. A poor CIBIL score makes getting approval for new loans challenging. That is where Business Debt Consolidation plays a role.
What is Business Debt Consolidation?
Taking a new loan to pay multiple existing business loans that streamline the repayment process is called Business Debt Consolidation. That makes it simpler to repay the business loans since you do not need to track multiple loans and lenders.
However, everything has its pros and cons. Similarly, Business Debt Consolidation has its advantages and disadvantages. It would help if you made a decision depending on what outweighs the other according to your needs.
Pros :
- Tenure: Since the loan repayment tenure will be longer, the monthly installment will reduce, making it easier for you to repay it. You can calculate the amount using a business loan calculator, making it easy to get an idea about your cash outflows.
- Low-Interest Rate: Business Debt Consolidation is likely to provide you with low-interest rates, hence allowing you to save money.
- Helps in Loan Applications: Business Debt Consolidation eases getting approval for a new loan application since it shows one loan rather than multiple lists of loans to the lender.
- Streamlines the Process: Business Debt Consolidation helps you simplify the repayment process and simplifies the tracking of due dates of your business loans.
- Simplifies Payments: Since you can choose the due date of the loan during a business debt consolidation, it helps you streamline the payments and select a date according to your monthly earnings.
Cons:
- Fees and Other Payments: Applying for a new loan might incur additional charges and payments that you should consider before taking the loan.
- Increase in Debt Amount: Since taking a new loan costs you extra, it might lead to an increased debt amount that is not beneficial.
- Paying Additional Interest Rate: Even with a low-interest rate, A longer tenure for the loan repayment leads you to pay more interest over time.
Factors to Consider before Opting for Business Debt Consolidation
- Eligibility: You must check for the eligibility criteria and see if you qualify before deciding on going for Business Debt Consolidation.
- Interest Rate: It is only viable to opt for Business Debt Consolidation if the interest rate you are getting is lower than the existing loans. You can use the business loan calculator to get an average rate of the current loans.
- Total Amount: It is essential to calculate the total amount of the present loans and see whether the new loan amount is less than the current total amount.
- Fees and Costs: It is vital to consider any extra fees or costs involved in taking a new loan to ensure that you do not pay much higher.
Therefore, you must examine all the pros and cons of Business Debt Consolidation according to your needs and consider all the factors before opting for one. It will ensure that you make the right decision for yourself that proves to be beneficial in the long run.
