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Debt Consolidation Using Personal Loans: Is It Right for You?

Individual debt levels have reached a critical point in the UAE. Out of the 10 million UAE residents, experts say more than 12 percent struggle with debt management. For many, personal loans are seen as a saving grace as they help manage your debt efficiently. However, you do need to carefully assess your situation before choosing personal loans as an optional solution.

What does Debt Consolidation Mean?

Debt consolidation is a financial strategy that allows you to combine all the loans you have into a single loan. This is a smart move as the debt consolidation loan is often provided at a marginally lower rate. The best thing is that you only have to worry about paying the single monthly repayment loan, which means a manageable monthly installment. Several UAE banks like Mashreq bank offer debt management and consolidation loans for individuals earning AED 5,000 to AED 10,000.

Why Get Personal Loans for Debt?

If you think using a new credit card to offset the debt is a good idea, you are wrong. It is far better to get a personal loan as the interest rates are comparatively lower than with credit cards. You also get a fixed repayment plan, helping you budget your funds accordingly.

At the First Abu Dhabi bank, you are encouraged to talk to the bank personnel and explain your situation. These individuals are trained to look at all your loans and strategize the best and most efficient method of repayment. The loans there such as Personal Loans for Nationals and Expats, Non-Salary Transfer Personal Loans and even New to Country Loans, give you the chance to borrow a high amount of money.

Is Debt Consolidation Right for You?

You need to understand that debt consolidation isn’t an easy path to follow to get rid of debt. Even with a personal loan, you do need to make a commitment to be debt free. The National Loan Scheme (NLS) introduced by the UAE Central Bank states as a clause that borrowers must cancel all the credit cards they own. This is to ensure you don’t inadvertently keep spending money you don’t really have.

To make the debt consolidation plan successful, you need to consider the following such as:

  • Multiple Debts: You have multiple debts from different lenders, making it hard to keep track of all the payments.
  • High Interest Rates: The interest rates on your current debts are high, and consolidating could potentially give you a lower rate.
  • Financial Stress: Managing multiple debts is causing you stress and consolidating could simplify your finances.
  • Stable Income: You have a stable income that covers the consolidated loan repayment.
  • Good Credit Score: Your credit score is good enough to qualify for a debt consolidation loan with favorable terms.
  • Long-term Plan: You understand that debt consolidation is a long-term plan and you’re committed to the process.

Conclusion

Debt consolidation is a useful tool for managing multiple debts, but it’s important to consider your individual circumstances and consult with a financial advisor before deciding. Discipline in money management is an important factor in becoming debt-free. Remember, the goal here is to make your debt more manageable and save you money in the long run.

Written by Eric

37-year-old who enjoys ferret racing, binge-watching boxed sets and praying. He is exciting and entertaining, but can also be very boring and a bit grumpy.

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