Author
LoansJagat Team
Read Time
8 Min
03 Jun 2025
Jaya sipped her chai at her favourite tapri, scrolling through her phone. "Arey yaar, fir se EMI reminders!" She shook her head in frustration. She paid ₹12,000 for her home loan, ₹8,000 for her car loan, and ₹5,000 for her personal loan—₹25,000 in total, but on different dates. "Matlab pura mahina bas due dates yaad rakhne me nikal jata hai!"
Her friend Vikram realised that she was very worried and leaned forward. "Arey Jaya, what's with all the tension? Just take one single EMI, na!"
Jaya looked up, puzzled. She asked, "How?"
"Simple hai!" Vikram said. "Right now you have various loans on which the interest rates are 12%, 14%, and 15%. Now if these can be consolidated into one loan at an interest of, say, 10%, even, it can reduce your total EMI to ₹22,000 from ₹25,000. That’s a direct saving of ₹3,000!"
Jaya’s eyes widened with realisation. "Wah bhai! Ek teer se do nishane—EMI bhi simple, bachat bhi pakki!" She decided to check her options. "Paise bachane ka asli jugaad yahi hai!"
For the first time in months, her chai tasted extra meethi!
It's the one fixed payment a borrower makes to a lender every month as part of an Equated Monthly Installment (EMI) plan. A single EMI helps you customise all your debts in one single affordable EMI as per your income and lets you pay the debt efficiently. A ‘single EMI’ loan is often referred to as a ‘debt consolidation’ loan.
People use single EMIs to make their money control simpler and reduce their psychological distress. These are the main reasons why you should choose Single EMI as a repayment method.
Simplified Repayments
Dealing with different lending terms becomes hard to handle. Under this option, customers make simplified single monthly payments that reunite all their financial obligations.
Example: Jaya would simplify her payment schedule when she combines all EMIs into one monthly payment.
Lower Interest Rates
If the interest rate on a consolidated loan is lower than the combined rates on existing loans, it can result in significant long-term savings.
Example: Jaya held bank debts with interest rates of 12%, 14%, and 15%. By merging her loans to a 10% rate, she reduced ₹3,000 of monthly EMI payments from ₹25,000 to ₹22,000.
Jaya’s existing EMIs vs. Single EMI
Loan Type | Existing Loan Amount | Old Interest Rate | Old EMI | New Interest Rate (After Consolidation) | New EMI |
Home Loan | ₹5,00,000 | 12% | ₹12,000 | 10% | ₹10,500 |
Car Loan | ₹3,00,000 | 14% | ₹8,000 | 10% | ₹7,200 |
Personal Loan | ₹2,00,000 | 15% | ₹5,000 | 10% | ₹4,300 |
Total | ₹10,00,000 | Varies | ₹25,500 | 10% (Consolidated Loan) | ₹22,000 |
Reduced Financial Stress
EMI payments become too difficult to handle when you need to pay several at once. The monthly fixed payment simplifies finances by lowering mental stress.
Example: A solitary EMI plan was simpler to handle for Jaya, rather than maintaining three different payments. No more worrying about multiple deductions from her account at different times.
Better Cash Flow Management
A single, steady payment helps you make better budgets and keeps your finances from getting tight at the last minute because of multiple due dates.
Example: The scheduled EMI date let Jaya arrange her money better so she could set aside funds for savings as well as for everyday expenses.
Avoiding Late Payment Fees
Nonpayment of several EMIs can result in penalties and also diminishes your creditworthiness. A single EMI payment provides better chances to avoid payment errors.
Example: Due to unpaid loans, Jaya received financial penalties twice, which she recovered afterwards. Having one EMI protected her from paying those unwanted penalties.
Improved Credit Score
Making regular loan payments on a single loan improves your credit score so you can access new loans more easily.
Example: Regular payment of her single loan kept her credit score optimal and made it simpler to find good financial deals going forward.
Higher Loan Eligibility in the Future
Effective handling of one monthly loan installment builds better financial standing, which helps you take out bigger loans at reduced rates later.
Example: Stable financial performance makes Jaya more eligible for larger loans that
come with discounted interest rates.
Jaya realised she needed to weigh certain risks against each other before concluding her decision to use a single EMI plan.
Higher Overall Interests: Although her EMI decreased, her loan duration extension led to increased interest expenses throughout the entire period.
Processing Fees and Hidden Charges: Jaya’s bank applied a 2% processing fee, and she faced extra costs due to prepayment restrictions on her previous loans.
Collateral Risk: She secured her house as collateral security, which exposed her home to property loss if she failed to meet payments.
Reduced Financial Flexibility: Her long-term fixed EMI caused constraints in her ability to handle unexpected expenses.
Temporary Credit Score Dip: Loan consolidation requires a hard credit inquiry, which affects the credit score briefly. The credit score of Jaya dipped momentarily when she underwent the mandatory credit evaluation procedure.
Not Always Cost-Effective: She discovered that despite her reduced interest payment, she needed to consider additional charges to accurately calculate money savings.
Debt Cycle Risk: The reduced EMI tempted Jaya to take on additional debts that threatened to create a new debt cycle.
Jaya realised she needed to weigh certain risks against each other before concluding her decision to use a single EMI plan.
Situation | Why Is It the Right Time? | Jaya’s Case |
Managing Multiple EMIs Becomes Difficult | Too many due dates make tracking payments stressful. | Jaya had 3 EMIs on different dates, making it hard to manage. |
High Interest Rates On Existing Loans | A lower consolidated loan rate can reduce monthly payments. | Her loans had 12%, 14%, and 15% interest, while a single EMI offered 10%. |
Need Better Cash Flow | Lower EMI means more money for savings and expenses. | Consolidation saved her ₹3,000 per month. |
Frequent Late Payment Penalties | One fixed EMI reduces the risk of late fees and damages the credit score. | She had missed payments before, affecting her finances. |
Planning A Big Financial Goal | Helps in managing funds for major expenses like a house or business. | She wanted better financial stability for her plans. |
Stable Income | Ensures smooth repayments without financial strain. | Her steady marketing job made consolidation a safe choice. |
The monthly EMI payment affects your credit score through various evaluation parameters. Here’s how:
Factor | Impact On Credit Score | Numerical Effect |
Hard Credit Inquiry | Applying for a single EMI loan triggers a credit check. | Score may drop by 5-10 points. |
Loan Closure and Credit Age | Closing old loans can reduce the average credit history. | Possible drop by 5-15 points. |
Timely EMI Payments | Regular payments improve credit history. | Score can increase by 50-100 points in a year. |
Missed EMI Payments | Late payments negatively impact the score. | The score may drop by 50-80 points. |
Credit Utilization Ratio | Consolidating multiple loans reduces the credit usage percentage. | If utilisation drops from 60% - 70% to 30% - 40%, the score improves. |
Future Loan Eligibility | Good repayment behaviour leads to better credit opportunities. | After 6-12 months, the chances of getting lower interest rates improve. |
The interest rate you receive at the bank determines the size of your Equated Monthly Installment (EMI). A higher interest rate produces increased EMI costs, but the opposite effect occurs when interest rates decrease.
Direct Impact on EMI
The amount of additional payment on loan value depends on interest rates.
The cost of paying interest to lenders will be increased when your interest rate is higher.
EMI Comparison at Different Interest Rates
Loan Amount | Tenure | Interest Rate | Monthly EMI | Total Interest Paid |
₹5,00,000 | 5 | 8% | ₹10,138 | ₹1,08,304 |
₹5,00,000 | 5 | 10% | ₹10,624 | ₹1,37,469 |
₹5,00,000 | 5 | 12% | ₹11,122 | ₹1,67,339 |
Fixed vs Floating Interest Rates
How to Lower EMI with Better Interest Rates?
Hack | Benefit | Numerical Impact |
Choosing the Right Tenure | Shorter tenure = Less interest | ₹5 lakh at a 10% interest rate: 5-year EMI: ₹10,624 10-year EMI: ₹6,608 |
Compare Interest Rates | Lower rates = Lower EMIs | ₹5 lakh at a 10% interest rate: EMI ₹10,624 ₹5 lakh at an 8% interest rate: EMI ₹10,138 (Savings of ₹29,000) |
Make Part-Payments | Cuts EMI or tenure | ₹10 lakhs at 10% interest for 10 years: EMI ₹13,215 ₹1 lakh prepayment: EMI ₹11,894 (or 1.5 years shorter) |
Loan Balance Transfer | Shift to a lower rate | ₹7 lakh loan at 12%: EMI ₹12,423 Transfer at 9% interest rate: EMI ₹11,261 (Savings of ₹97,000) |
Automate EMI Payments | Avoid late fees and score drops | Missed ₹15,000 EMI, Fee: ₹500 to ₹1,000 + 50-point drop |
Increase EMI with Salary Hike | Faster loan closure | 2,000 per month cuts loan by 2 to 3 years |
Maintain a High Credit Score | Better loan offers | 750+ score: 10% loan 650- score: 14% to 16% loan |
Avoid Unnecessary Loans | Prevents burden | Home (₹25,000) + Car (₹12,000) + Personal Loan (₹10,000) = ₹47,000 EMI |
Choosing a single EMI is all about timing and financial strategy. If you're juggling multiple EMIs with different due dates and high interest rates, consolidating them can simplify payments and reduce costs. The best time to opt for a single EMI is when interest rates are favourable, your credit score is strong, and you have a stable income to support repayment. While it offers savings and convenience, be mindful of processing fees and tenure extensions. Smart planning ensures that a single EMI isn’t just an option but a financial upgrade!
Failing to make payments brings sequential charges of late fees alongside penalty interest and decreased credit score.
Available funds should be used to pay loans in full because this practice eliminates ongoing interest expenses. The use of a single EMI can serve to maintain your financial cash flow management needs.
On-time payments will improve your credit score, yet delayed or non-payments cause credit score damage.
Single EMIs become a common feature in personal loans as well as credit card purchases alongside retail financing because they offer flexibility and reduced costs.
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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