Personal Loan: When considering the option of obtaining a new loan to settle an existing one, it is essential to recognize that this choice can be intricate. While it may not necessarily be an unfavorable option, several factors warrant careful evaluation beforehand.
In instances where multiple loans have been acquired, consolidating them into a single loan can be advantageous. For instance, if you have five loans amounting to Rs 2 lakh each, securing a loan of Rs 10 lakh to cover these debts could prove beneficial, as it would eliminate the need to manage multiple EMIs.
Even if the outstanding balance on the existing loans is substantial and carries a high interest rate, obtaining a new loan at a lower interest rate may be advantageous. If the new loan offers more favorable terms, is easier to manage than the previous one, or is sourced from a bank with which you maintain a positive relationship, pursuing this option may be prudent.
There’ll be some risk to take another loan to repay old loan
However, if the new loan carries a higher interest rate, it would be wise to reconsider this approach. Many individuals fall into a cycle of debt by taking out personal loans to pay off older loans, inadvertently exacerbating their financial situation. Additionally, banks may impose hidden fees on loans, potentially increasing your overall repayment amount. Even if your current loan is manageable and the EMIs are being paid without difficulty, it is advisable to refrain from acquiring a new loan.
Disclaimer
This is general information based on available online sources. Please verify before making any transactions. Times Bull is not responsible for any financial investments made, as it is entirely your responsibility. For better results, please consult a financial advisor.