Debt Consolidation Loan: Should You Combine All Your EMIs
Key takeaways
- 1. Debt consolidation combines multiple high-interest loans into one single loan with a lower EMI. 2. It works best when your new interest rate is lower than the average rate of your existing loans. 3. Your CIBIL score can actually improve over time after consolidating debt if you make timely payments.
What is Debt Consolidation?
Debt consolidation means taking one new loan to pay off multiple existing loans or credit card dues. Instead of managing 4 or 5 different EMIs with different due dates and interest rates, you have just one monthly payment at a potentially lower interest rate.
When Does Debt Consolidation Make Sense?
Debt consolidation is a good idea in these specific situations.
- You have 3 or more active loans or credit card dues
- Your combined monthly EMIs exceed 50% of your take-home salary
- Some of your existing loans have very high interest rates above 18%
- You are missing EMI due dates because there are too many to track
- Your credit score has improved since you took your original loans
How Much Can You Save?
The savings depend on the difference between your current average interest rate and the new consolidation loan rate. For example, if you have a credit card due of ₹2 lakh at 36% interest and a personal loan of ₹3 lakh at 18% interest, consolidating both at 12% can save you thousands of rupees every month.
How to Apply for a Debt Consolidation Loan on Finbros
1. Enter your total debt amount and current monthly EMI burden
2. Check offers from 12+ lenders in under 2 minutes
3. Choose the offer with the lowest interest rate
4. Complete your application online — no branch visit needed
5. Receive funds directly in your bank account
Things to Watch Out For
Debt consolidation is not always the right move. Watch out for these common mistakes.
- Do not consolidate if the new rate is higher than your current average
- Avoid extending your loan tenure too much even if the EMI looks attractive
- Do not use the freed-up credit limit to accumulate new debt
- Check for prepayment charges on your existing loans before consolidating