Clear Multiple Loans Fast – Single Strategy That Works

‘Kitne Loan? Bas Karo Yaar!’ 

Do you know that around 72% of Urban Indians struggle with more than 3 loans? (Financial Express ) Whether it is a combination of a home loan, car loan, personal loan, or even credit card EMIs, the total payments can quickly add up. Before you know it, 80% of your salary could be drained by EMIs alone. 

So, how do you find your way out of this mess? How can you clear multiple loans without trying different strategies and following one simple solution? 

Yes, there is. Debt Consolidation.

As the name suggests, debt consolidation means merging all your loans into one single loan. I know, you are probably thinking, 

"But all my loans have different interest rates!" You are right! 

The interest rate on a debt consolidation loan depends on factors like your credit score, existing loan rates, and repayment history. 

But do you know that in most cases, the overall interest rate is lower than what you are paying right now?

For Example, Rohan, a 32-year-old IT professional, has set up 5 different EMI reminders. The details about each of the loans are given in the table below. If we add in a ₹15,000 home appliance loan, his total monthly EMI would probably be ₹68,000. You know what is more shocking? His salary. It is just ₹1 lakh.

But what if Rohan consolidated all his loans into a single ₹23 lakh debt consolidation loan at 11% interest? His new EMI would drop to around ₹45,000, instantly saving ₹23,000 every month. Let us understand it with a table. 

I know one example is not enough to explain such a concept. So, this blog explains debt consolidation in a very simple way. From its working in 2025 to its benefits, you can find everything in this blog. 

What is Debt Consolidation? 

When I was 12 years old, I used to send the same meme to my 7 friends, separately. ‘Mehnat dekh rahe ho?’ So, to save my much-needed energy, I created the first WhatsApp group of my life.

Similarly, debt consolidation helps you to consolidate multiple loan payments into a single loan, and that too with a lower interest rate. So, instead of keeping track of multiple payments, you now have just one.

This method simplifies repayment, reduces financial stress, and can help borrowers save up to 50% in interest costs. When managed properly, it can also improve your credit score over time.

For Example, Rishi is a 34-year-old marketing executive. He had 3 high-interest debts for which the total EMI was ₹45,000. Let us look at his finances before he opted for a debt consolidation loan with the help of the table given below:

He was able to secure ₹15 lakh at 11% interest as a debt consolidation loan. This allowed him to pay off all his existing loans and merge them into one manageable monthly EMI of ₹28,000.

How Debt Consolidation Works in 2025

Step 1: Assess Your Total Debt

Before solving a problem, you need to understand it completely. What if you are about to make rajma, but halfway through, you realize you are out of salt? Now, you either have to run to the store or settle for a tasteless dish. Managing debt without a proper breakdown works the same way. You either keep track of your monthly payments and know what to expect each month, or face an unexpected financial situation just because you were paying blindly.

For Example, Ravi, a 30-year-old graphic designer, faced this very problem. Every month, he paid multiple EMIs, but his total debt remained the same. So, he decided to sit down with his bank statements and create a Debt Map. It looked like the table given below: 

Seeing this breakdown, Ravi realised the majority of his payments were going to interest rather than reducing the principal loan amount. As a result, despite making regular EMI payments, his total debt remained almost unchanged. So, to break through the debt cycle, he chose to apply for a debt consolidation loan.

Step 2: Check Eligibility 

Whether you qualify for government exams or not, make sure you qualify for the consolidation loan criteria. Debt consolidation is a powerful tool, so banks need to make sure it is not misused. They want to ensure they lend money to responsible borrowers only. Common eligibility criteria are: 

1. Credit Score 

Your credit score determines how trustworthy you are as a borrower. If your score is above 750, you can secure lower interest rates (as low as 10%). If it is below 650, banks might reject your loan or charge very high interest.

2. Income Stability

Most lenders require a minimum monthly income of ₹25,000. Mostly, salaried individuals with stable jobs are preferred, but if you are a freelancer, you can explore other options that banks offer.

3. Debt-to-Income Ratio (DTI) 

Banks calculate your DTI ratio to see if you can handle a new loan. Ideally, your total EMIs should not exceed 50% of your salary. 

‘Loan le rahe ho, buffet ka khana nahi’ 

Step 3: Choose Your Loan Type

After you have checked the eligibility criteria, explore different consolidation loan options. Compare these options with one simple goal that is, to reduce interest rates and EMIs. Choose the option that is suitable for you ‘kyunki aap khaas ho!’

To save your time and effort, we have created a table comparing different loan types.

Once you have selected the best-suited loan type, calculate the EMI using the online EMI calculator tool. This was you will give you an idea of what you are committing to. 

For Example, Sakshi is a 29-year-old architect. She finds it difficult to pay ₹38,500 in EMIs across three loans. She used an EMI calculator before consolidating with a personal loan at 11%, reducing her EMI to ₹25,000. 

This saved her ₹2.5 lakhs in interest over five years. With an extra ₹13,500 per month, she finally had room to save and invest, easing her financial stress.

Benefits of Debt Consolidation in 2025

1. Lower Interest Rates

One of the biggest advantages of debt consolidation is reducing the amount of interest paid over time. ‘Yahin to zyada paisa lagta hai, haina?’  Many people rely on credit cards, which have interest rates as high as 36% per annum. By shifting to a debt consolidation loan with an interest rate of 10–12%, borrowers can save ₹3–5 lakh over a standard five-year period.

You know what happens when your interest rates reduce? Your repayment timeline also shortens. So, now you can clear off your principal amount without being burdened by the high interest rates.

2. Simplified Payments

Just like how I saved my time and efforts by making a WhatsApp group, you can also simplify your payments by debt consolidation. Now you do not need to set multiple reminders or stress over missed payments. Since all loans are combined into one, you can repay easily and have a clear idea about the monthly payments.

3. Credit Score Recovery

One of the lesser-known benefits of debt consolidation is the positive impact on credit scores. ‘Yahi to chahiye!’ Missed payments, high credit utilization, and multiple ongoing debts can bring down a borrower's credit score significantly. However, timely payments post-consolidation can increase credit scores by 50–100 points per year. 

How Debt Consolidation Helps Credit Score Improvement

• Timely Payments: Since all debts are merged into one manageable EMI, the borrower is less likely to miss payments. Also, there is no need to set multiple reminders, ‘Ek Kafi hai’
  
  
• Lower Credit Utilization: Paying off credit card balances reduces the credit utilization ratio, which is a major factor in credit scoring. High credit utilization indicates that you’re highly dependent on loans and are not financially disciplined. 
  
  
• Improved Debt-to-Income Ratio: By consolidating multiple debts into a single loan, you often need to pay lower monthly payments. Due to reduced EMI, your debt-to-income ratio is improved, increasing your creditworthiness.
  
  

Risks & How to Avoid Them

1. Taking New Debt

‘Ek galti kitni baar karoge?’

A common mistake borrowers make after consolidation is falling back into the debt cycle. Never convert your mistakes into habits. Taking back-to-back loans is a bad habit that can convert into a serious addiction in no time. Many individuals continue using credit cards while repaying the consolidation loan, leading to a new pile-up of debt. This is the road leading to debt trap.

Solution: ‘Consolidate karne ke baad naye credit card mat lo!’
 

As advised by my father, you should freeze or close unnecessary credit cards post-consolidation to avoid unnecessary spending. Doing this, you are restricting the options that can ruin your financial stability. 

2: Choosing Long Tenures

‘Loan hai, Spotify par playlist nahi’

While consolidating loans, some borrowers opt for longer loan tenures such as 7 to 10 years. This is done to reduce their monthly EMI burden. However, never forget that longer tenure equals more interest paid over time. 

For Example, Suppose you have consolidated a loan of ₹5,00,000 at 10% interest for 5 years. Your total interest paid will be around ₹1,37,000. But if you extend it to 10 years, the EMI will be lower, but the total interest paid will be ₹2,93,000, more than double!

Solution: Stick to a repayment tenure of 3–5 years to balance affordability and savings. This way, the borrower pays off the debt faster without excessive interest accumulation.

By choosing the right repayment strategy and avoiding these pitfalls, debt consolidation can truly lead to financial freedom. It is up to you whether you want to make it a short-term relief with long-term consequences or short-term repayment with long-term relief.

Conclusion

Debt consolidation is more than just combining loans, it is about regaining financial stability. By merging multiple high-interest debts into one manageable EMI, borrowers can enjoy multiple benefits. You can save significantly on interest, simplify repayments, and improve your credit scores over time. However, choosing the right loan option and maintaining financial discipline is crucial. ‘Ye nahi to kuch nahi’ Without careful planning, you might end up in a deeper debt cycle.

If you are struggling with multiple EMIs, do not wait any longer and take control ASAP. Assess your total debt, check eligibility, and choose the best consolidation option suited to your financial needs. With lower interest rates and a single payment schedule, you will reduce stress and build a more secure financial future.

So, start your journey, be debt-free today! ‘Tiger ho aap, loan ke liye apply karo’

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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?