Making repayment easier
It is only common for a person to borrow money from banks or financial institutions. And it is also common that one person can avail multiple loans of different types. For example, a person can avail an auto loan for the purchase of a car though he already has availed a personal loan. The banks approve his loan request based on the repayment capacity of the person. The person may have the capability of repaying all his loans but it might not be easy for him to manage his finances if he has multiple loans. For example, if he has to pay $1000 for a loan on the 3rd of every month and $750 for a loan on the 5th of every month, if he, by mistake, arrange only $750 on the 3rd of a particular month, then his repayment advise would bounce back due to insufficient funds and he may become a defaulter. He may also have to incur unnecessary charges.
In such cases, to avoid confusion, the banks provide them with the option of Debt Management wherein they allow debt consolidation. They consolidate all debts into one and fix one rate of interest and one repayment schedule so that the persona can mange his finances well and repay his debts on promptly.
