Best Time to Consolidate Loans – Key Reasons to Act Now

‘Har cheez ka muhurat hota hai’

No, we’re not astrologers, we’re just here to help you make smarter financial decisions at the right time.

How many of you invest in the stock market? The market is down, right? Some experts are recommending certain stocks, while others suggest different ones. How can they be so sure of what they say? This is because they know the external factors that will drive the market this year. And when that happens, ‘paisa hi paisa!’

‘Ab hum experts se kam hain kya?’ As a friend (not an advisor), if you’re stuck with multiple EMIs and high-interest loans, 

2025 is the best time to consolidate. Why? Well, telling you everything right now would not be fun, right?

So, let us dive into this blog and explore why debt consolidation makes so much sense this year.

Why 2025 stands out

1. RBI’s Repo Rate Cut to 6.25% 

In 2025, the Reserve Bank of India (RBI) reduced the repo rate from 6.5% to 6.25% (as per Clear Tax). Now, what is a repo rate, and why should I care? The repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks. 

When this rate decreases, banks also lower the interest rates they charge customers on loans. This is also applicable to personal loans used for debt consolidation.

So, what does this mean for you? If you're struggling with high-interest debts, such as credit cards or personal loans, this is the perfect time to take action. Now, you can combine all your debts into one EMI at a lower interest rate. 

This repo rate cut is not just economic news; it's your chance to take control of your finances. 

For Example, Arnav was struggling with multiple debts (details are given in the table). His total EMI burden was ₹33,500 per month, making it difficult for him to manage his expenses. 

In 2025, after the RBI cut the repo rate, his bank offered lower interest rates on consolidation loans. Arnav took advantage of this and combined his ₹7 lakh debt into a single consolidation loan at an interest rate of 12%. This reduced his monthly EMI to ₹15,500. Let us examine his financial journey after consolidation, using the table provided below.

2. Bi-Weekly Credit Score Updates 

Did you know that in 2025, credit bureaus will now update credit scores every 15 days instead of once a month (India Today)? That means if you’re paying your EMIs on time, your credit score improves much faster than before! Now, you do not have to wait for an entire month to see a boost in your scores. 

However, remember that late payments can also impact your credit score twice as fast. Therefore, be mindful of your financial habits and maintain consistency. Do not procrastinate and take charge of your credit health today! 

How This Helps Borrowers

1.      Faster Score Improvement – Regular EMI payments show up on credit reports sooner. This allows borrowers to see improvements in their scores within weeks, rather than months.

2.      Better Loan Opportunities – A higher credit score in a shorter period increases the chances of securing lower interest rates for future loans. 

3.      Reduced Credit Risk – With quicker updates, lenders get a more accurate picture of a borrower’s financial health. This helps banks trust the responsible borrowers, often offering better credit deals.

For example, in 2024, Aarav’s credit score was stuck at 650 due to past late payments. He consolidated his ₹5,00,000 debt into a single EMI and started paying on time. Previously, updates took a month, which delayed improvements.

By 2025, with biweekly updates, his score jumped 50 points in just three months, reaching 700 within a year. ‘Esa comeback to Honey Singh ka bhi ahi hua!’ Due to the improved credit score, he secured a car loan at 9% interest instead of 12%.

3. Lower Interest Rates on Secured Loans 

Can you use gold, property, or even mutual funds to secure a loan at a lower interest rate? Such loans are called secured loans. Since you are giving collateral, it becomes easy for banks to trust you. That is why secured loans often come with lower interest rates, often between 8% to 12%. That is a significant difference compared to other loans, which typically have interest rates of around 18–20%.

Almost every Indian household is dealing with more than one loan. Instead of stressing over multiple EMIs, late payments, or penalty charges, consolidate all your loans. This will reduce your monthly EMIs to a single one. Now, start your week with a good jingle rather than EMI reminders.

Just make sure you’re confident about repayment, after all, your asset is on the line. But when done wisely, it’s a smart move to cut down those EMIs and the unnecessary stress.

For Example,  Meera is a schoolteacher from Jaipur. She had three loans to repay. A personal loan of ₹3 lakhs at 18%, a credit card debt of ₹1.5 lakhs at 36%, and a business loan at 16%. Dealing with multiple EMIs was not easy for her, and delays often led to late fees and stress.

After a good conversation with our team, she used her mother’s gold jewellery (worth ₹5 lakhs) to take a secured consolidation loan at just 10% interest. Let’s see her financial journey with the help of the table given below.

4. Consolidation Loan for Low Credit Scores

We live in a world where there is something for everyone. You definitely get benefits on a credit score above 720, but what about those who have low scores? Are they even eligible for a debt consolidation loan? If yes, then what are the interest rates they are offered?

Do not worry, in 2025, banks and NBFCs are showing more flexibility, even for borrowers with scores as low as 600. They can qualify for consolidation loans, but the interest rates might be higher. But hey, think of it as a chance to improve your credit score. You make timely payments of the consolidated loan, and within a few months, you will start seeing the difference in your score.

Remember, you do not need a perfect score to begin your debt-free journey. But even a little improvement in your credit score can save you thousands of rupees in interest. So, make timely EMI payments, keep credit card usage low (30%), and avoid multiple loan applications. Even small steps help lift your score quickly!

Debunking Debt Consolidation Myths

It’s 2025, and while the world of finance has become smarter and more accessible, people are still trusting the WhatsApp texts sent to their least activated groups. Believing in myths about debt consolidation can cost you a lot.

To save you from any of the traps, we are going to debunk three of the most common myths that are fooling you.  ‘Savdhan rahiye, Satark rahiye, Aage padhte rahiye!’

Myth 1: “Debt Consolidation Hurts Your Credit Score”

The Misunderstanding:
 

 People often fear that applying for a consolidation loan will affect their credit score. 

The Reality:
 

Yes, when you apply, lenders will run a hard inquiry on your credit report. That could drop your score by 10–20 points, but 

here’s the thing, it’s temporary.

Once you consolidate and start making timely payments, your credit score begins to rise steadily. That is because consolidated loans simplify your repayment structure, reducing the chances of missed or late payments. Over time, your repayment discipline gets reflected in your credit report, often leading to a steady increase in your score month by month.

Think of it like a reset button. You might take a small step back initially, but with consistent effort, you will move ahead much faster and with a lot less financial stress.

Myth 2: “All Types of Debt Are Eligible for Consolidation”

The Misunderstanding:
 

 Many borrowers assume they can pack all types of loans, home, car, credit card, and even taxes, into one easy EMI. ‘Aisa thoda na hota hai!’

The Reality:
 

Sorry, but not everything can be bundled. While many unsecured debts can be combined, certain debts are typically excluded. According to CBS News, debts like credit cards, personal loans, medical bills, student loans, auto loans, and retail store cards are commonly consolidated (CBS News). 

However, secured debts (e.g., mortgages, home equity loans), tax obligations, and court-ordered payments (like alimony or child support) usually cannot be included in consolidation programs. Though there are banks that offer a consolidated loan for secured debts but the interest rates may be higher than what you have expected.

Myth 3: “Lower EMI Means You’re Paying Less Overall”

The Misunderstanding:
 

 "Wow, my EMI dropped from ₹12,000 to ₹7,000! I'm saving money!" ‘Kuch bhi?’

The Reality:
 

Yes, a lower EMI does offer instant relief. Your monthly burden feels lighter, sure. But what is often missed is the trade-off. If your loan tenure stretches from 3 years to 10 years, the total interest you end up paying could double or even triple. You’re not saving money, you’re just spreading out your debt over a longer period.

This is one of the biggest traps in debt consolidation. Lower EMIs feel like you have won a lottery, but it is you who would be paying more. If you're not doing the math now, you're setting yourself up for more financial strain later.

What This Means for You

Let’s be honest, debt consolidation is not just about clubbing all your loans together. When done wisely, it can truly transform your financial life. But that only happens when you're aware of the bigger picture.

·         Know what you can and ca not consolidate: Not all debts qualify. For example, things like tax dues or alimony usually ca not be included.

·        Understand the short-term vs. long-term impact: Your credit score might dip a little at first, but regular payments can help it recover and grow stronger over time.

·         Do not fall for the EMI trap: Lower EMIs might feel good, but they do not always mean you're paying less overall. Stretching the loan term can mean more interest.

Conclusion

Not every good thing has to be difficult. Managing debt is easy, only if you walk on the right path. With better interest rates and smarter digital tools, 2025 is the perfect year to take control of your finances. Whether it is consolidating multiple loans, switching to lower EMIs, or using new repayment strategies, small steps can lead to big relief. 

Avoid high-interest traps, and use trusted platforms to compare options. This can simplify your journey. Do not let debt dictate your peace of mind. Start planning, stay consistent, and choose wisely. The sooner you act, the closer you get to financial freedom. Make 2025 the year you reclaim your money power. ‘Apna time aa chuka hai!’

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About the Author

LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?