Author
LoansJagat Team
Read Time
5 Min
14 May 2025
How To Get Out Of Debt Faster By Consolidating Your Loans – Expert Guide
Riddhima was handling three loans at once: a personal loan of ₹1.5 lakh at 16% interest, credit card dues of ₹75,000 at 36%, and a vehicle loan of ₹50,000 at 13%. Every month, she paid EMIs of around ₹9,000.
She noticed that she was paying regularly, but her debt was not shrinking. She decided to combine everything into one loan at 13%.
Now, she is paying an EMI of around ₹6,500. This simple step helped her save more than ₹30,000 over three years.
If you consolidate all your loans under one roof, you reduce stress, cut interest, and speed up repayment. If you are also dealing with too many loans, this blog will show you how to take control.
What is Loan Consolidation?
It simply means taking one loan to pay off several other loans. Instead of handling multiple due dates, interest rates, and lenders, you now deal with just one.
Here, the interest is usually lower, and tenure is fixed so that you can plan better.
Who Should Think About This?
The following are some cases where combining your loans makes sense:
Situation | Explanation |
High credit card dues | Over ₹50,000 at 30 to 40% interest |
Multiple EMIs | More than two loans are eating up your income |
Penalties for late payments | Regular delays impacting credit score |
Unmanageable monthly burden | Over 40% of your salary goes into loan EMIs |
Good repayment track record | So lenders offer better terms for consolidation |
Why Combine Loans?
Advantage | How Does It Help? |
Lower EMI | New loan may come with a reduced rate |
Easier tracking | Just one EMI date, no confusion |
Improves credit score | On-time payments on one loan look better |
Saves money on interest | Less rate means lower cost over the years |
Peace of mind | Fewer lenders, less mental stress |
Example: How Much You Can Save
Suppose your current debt situation is:
Type of Loan | Amount (₹) | Interest | EMI (₹) | Remaining Period |
Credit Card | 80,000 | 36% | 4,000 | Revolving |
Personal Loan | 1,20,000 | 16% | 5,800 | 36 months |
Bike Loan | 50,000 | 13% | 2,000 | 24 months |
Total EMI | - | - | 11,800 | - |
Now, if you will take a single loan of ₹2.5 lakh at 13% for 3 years:
Amount of New Loan | Rate | Tenure | EMI (₹) |
₹2,50,000 | 13% | 36 months | ₹8,450 |
Monthly, you will be able to save ₹3,350. And your savings for 3 years will be ₹1,20,600 (approx.).
Sources For Consolidation Loans
For such loans, you can apply at:
- Personal loans offered by bank
- NBFCs with low rates for salaried people
- Lenders give you top-up loans on existing personal loans
Most of such loans generally range between ₹50,000 and ₹25 lakhs. However, your loan tenure can go between 1 and 5 years.
What You Should Check First?
Factors | Description |
Credit Score | A score over 700 gets a lower interest |
Cost of Current Debt | Add all EMIs and compare with a new offer |
Foreclosure Charges | Old loans may have exit fees |
Processing Fee | Usually 1% to 3% of the loan amount |
New EMI | Must be affordable based on your income |
How Tarun Paid Off Debt in 3 Years?
For a better understanding, let’s have a look a Tarun’s case after consolidation:
Particulars | Before Consolidation | After Consolidation |
Monthly EMI | ₹11,800 | ₹8,450 |
Rate of Interest | Up to 36% | 13% |
Lenders to Manage | 3 | 1 |
Due Dates | 3 every month | Just one |
Peace of Mind | Low | High |
With the savings, Tarun is able to invest and build an emergency fund instead of drowning in interest.
Tips To Use Consolidation Well
Tip | Description |
Compare offers | Check 3 or 4 lenders before choosing. |
Keep old cards open | Keep them at zero balance, but don’t close them. It will keep your credit history intact. |
Stop new borrowing | Avoid card use after clearing dues |
Automate EMIs | Use auto-debit to avoid missed payments |
Prepay extra | One extra EMI yearly can save big on interest |
How Prepaying Helps?
Suppose you are prepaying one EMI each year:
Year | Regular EMI Paid (₹) | Extra EMI Paid (₹) | Remaining Principal (₹) | Interest Saved |
1 | ₹1,01,400 | ₹8,450 | ₹1,73,000 | ₹6,000 |
2 | ₹1,01,400 | ₹8,450 | ₹85,000 | ₹4,800 |
3 | ₹1,01,400 | ₹8,450 | ₹0 | ₹4,000 |
Now, you are able to end your loan approximately 6 months early. Also, you have saved more than ₹14,800.
When To Avoid Consolidation?
Situation | Reason For Not Being Ideal |
No regular income | Risk of missing payments |
Only small time left on loans | Charges may outweigh savings |
The new loan rate is not better | You pay more in the long run |
High processing charges | Extra cost eats into the benefit |
Final Thoughts
It is not possible for you to suddenly start earning more income each month. But with controlling and planning you can easily get yourself out of debt.
Combining various loans into one will help you a lot. It will reduce your confusion, lower total interest, and also bring faster relief from increasing pressure of debt.
After consolidating your loans, you must focus on keeping your payments regular and ignore taking any new loans or
credit cards.
Instead, you must use your extra monthly savings to invest slowly, create a safety fund, and clear other small dues.
FAQs
1. How fast can I get such a loan?
You can mostly get it within 7 to 10 working days.
2. Do I need any security for this loan?
No, it is usually given without any collateral.
3. Can I use this for credit card debt?
Yes, it works well for high-interest cards.
4. Does this impact my credit score?
It may drop briefly but improves with regular payments.
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?
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