Debt Consolidation – A Smart Financial Move You Should Consider

‘Salary jaati kidhar hai?’

One day, I was sipping chai, casually scrolling through Myntra, eyeing a ₹2,000 denim shirt. Barely 5 minutes had passed when my screen flashed reminders for 3 credit card bills and 1 personal loan EMI. ‘Poora mood kharaab ho gaya tha.’

What you do not know is, I was ₹6 lakh in debt. Yeah, you are probably pitying me. Do not worry, I was doing it myself, too.

My salary is ₹75,000, and ₹45,000 (60%) vanishes into EMIs. The remaining ₹30,000 barely covers groceries, travel, and essentials. I am not joking, I had deleted Myntra within seconds after the reality struck me. 

Did you just nod along? Thought so. But here is the difference, I am older and wiser now, and I have found the solution. It is debt consolidation.

Instead of struggling with multiple high-interest debts, why not switch to one loan at a lower interest rate? You must be asking yourself, ‘Apna time kab ayega?’ Well, my dear readers, 2025 is just the perfect time to make this smarter financial move. Why? Let’s understand it in this article.

How Debt Consolidation Works 

Debt consolidation works like a “financial detox” for your loans. Instead of paying 3–4 lenders at interest rates as high as 40%, why not take one loan at a lower rate (e.g., 10–12%)? Use the amount to clear all existing debts. This simplifies repayments into a single EMI and reduces your interest burden by a mile.

For Example: Riya is a 28-year-old marketing executive. She had ₹8 lakh in debt across three credit cards (24% interest) and a personal loan (15%). As suspected, she was not able to buy even the basics due to multiple EMIs. So, she decided to consolidate her debts into a single loan at 11% interest. 

Let’s see how this decision helped with her finances with the help of the table given below:

What Types of Debt Can You Consolidate in 2025

“Expecto Patronum!”, a powerful spell indeed, but sadly, debt consolidation does not work like magic. However, with the right approach, it can make your financial life a lot easier. You just need to have the right information with you. Let’s start by knowing what can and cannot be consolidated. Here is a breakdown of debts you can combine in 2025.

1. Credit Card Debt 

Swiping your card is easy. Paying off a 36% interest rate? Not so much. If your credit card bills are piling up, combining them into a lower-interest personal loan could be a smart move. You can reduce your EMI and pay off debt faster. 

2. Personal Loans 

Multiple personal loans mean multiple lenders, multiple due dates, different interest rates, and endless reminders. So, instead of struggling with them all, opt for a single consolidation loan. It can simplify payments and possibly cut down your interest costs too. Secure your mental peace along with your finances.

3. Retail EMIs 

We, as a generation, have normalized some questionable financial habits. For instance, Zero-cost EMIs. I fell for it 2 years back. First a dream TV, then furniture, then gadgets. Before I knew it, my salary was vanishing into 10 different EMIs.

Thankfully, I consolidated my retail EMIs into one structured payment. Now, I have been making just one monthly payment for 2 years, and this month? It is my last! I will be debt free, finally!

4. Medical Bills 

India’s healthcare sector is booming, but so are medical expenses. A hospital visit can ruin your 6 months of financial planning, making it difficult to clear dues. With rising costs, many lenders now offer the option to consolidate medical bills into a structured repayment plan. This can reduce financial stress without the burden of high-interest loans.

Why 2025 is The Perfect Year for Consolidation

​Several key factors make 2025 the best year to consolidate loans. Now, borrowers can clear off their debts faster than they imagined. Let's explore the said key factors and see how exactly they work:​

1. RBI’s Repo Rate Cut (6.25%) 

You know what is more powerful than the interest rates that we pay to the banks? The repo rate. It is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks. When the RBI lowers this rate, banks can borrow money at a cheaper rate. They often pass on those savings to us through higher FD rates or lower loan interest rates.

In February 2025, the RBI cut the repo rate by 25 basis points, bringing it down to 6.25% (Reuters). This has led to banks lowering their lending rates across personal loans, making debt consolidation much more affordable.

Why this matters for you:
 

If you are paying 14–16% interest on a personal loan, refinancing your debt could lower the interest rate to 11%. This will reduce the EMI, making it a lot easier for you to clear off your debt. 

For Example, Amit is a small business owner. He had a ₹5 lakh personal loan from 2024 with a 14% interest rate, resulting in an EMI of ₹11,634. Post the rate cut, he refinanced at 10%, reducing his EMI to ₹10,624. That is ₹1,010 saved every month, enough to reinvest into his business or cover a child’s tuition. Let’s review it better with the help of the table given below:

2. Inflation Stabilization (3.61%) 

Inflation affects everything, from groceries, fuel to your rent. But in 2025, India’s retail inflation dropped to 3.61% (Reuters). This is all because of stabilized food and commodity prices. This may seem an insignificant number, but it actually plays a huge role in personal finance.

Why this matters for you:
 

Lower inflation makes your monthly budget more predictable. If you can spend on your essential expenditure, you are better positioned to take on a structured loan. Why? Because now you are not struggling with the basics and are even saving a little every month. With this, you can commit to fixed EMIs without fear of financial surprises.

For Example,  Rohit, who is a digital marketer, used to avoid debt consolidation due to rising costs. His monthly groceries and commute totaled ₹13,000 in 2023. But suppose inflation rate dropped to 4.5%, his costs would now be ₹11,700. 

Since he had a stable income source, he consolidated ₹3.2 lakh at 10% (down from 14.5%). His EMIs dropped from ₹9,800 to ₹6,900. Now, he saves ₹2,900/month. ‘Haina SMART move?’ Let us see his financial journey with the help of the table given below:

3. Fintech Innovations 

Back in the day, getting a loan was a process. Visiting banks, printing documents, waiting weeks for approval, just like any normal ‘sarkari kaam’. In 2025, fintech platforms have made debt consolidation lightning fast. Companies like HDB Financial Services now offer instant personal loans up to ₹20 lakh, with approvals as quick as 24 hours (HDB’s loan services).

Why this matters for you:
 

You do not need to run from one branch to another. Just log in to a verified app or site, upload documents, and track everything digitally. You also get options like flexible repayment tenures (up to 5 years), which let you choose a plan that fits your wallet.

For Example, Simran is a freelance designer. She was struggling with four different credit card dues totaling ₹2.2 lakh, each with interest rates between 30–36% annually. In 2025, she used a fintech app to consolidate the entire amount into a single personal loan at 13% interest. 

The approval came within 12 hours, and her new EMI is ₹4,900 for a 5-year term. Now, instead of managing multiple due dates and hefty interest, she makes one predictable payment, saving over ₹45,000 in annual interest.

4. Higher Tax Rebates in Budget 2025 

The 2025 Union Budget brought some good news for salaried and middle-income earners. Tax rebates were increased for individuals earning up to ₹12 lakh per year (Reuters). That means your take-home salary is increased, and yes, you can use that extra cash to tackle debt.

Why this matters for you:
 

Even a ₹2,000 increase in monthly take-home income can make a big difference in repaying consolidated EMIs faster, or even prepaying a portion of your loan each year.

For Example, Anjali, a teacher with an annual income of ₹10.5 lakh. She now takes home an extra ₹3,000 every month post-2025 Budget. Instead of spending it, she smartly added it to her existing consolidation loan EMI of ₹11,000, raising it to ₹14,000. 

This move helped her reduce her overall interest burden by approximately ₹18,000 and cut her loan tenure short by four months. Let’s review her financial journey with the table given below:

5. Easier Loans for First-Time Borrowers

‘Job ke liye experience chahiye, experience ke liye job’

Something similar happens with the first-time borrowers. If you have never taken a loan before, you might have been rejected earlier due to a lack of credit history. Not anymore. In 2025, lenders like HDBFS introduced ‘New to Credit’ loans. These loans are specifically designed for people with no previous loan or credit card experience (HDBFS).

Why this matters for you:
 

This opens the door for students, freshers, or first-time borrowers to consolidate education, healthcare, or startup-related debt. Even without an existing credit score, these individuals can now access consolidation options more easily through new-age fintech platforms.

Conclusion

We understand that being in debt is not fun. It is stressful, exhausting, and sometimes, plain embarrassing. But 2025 has made it a lot easier to deal with all your debts with one consolidated loan. With lower loan rates, fintech apps that actually work, and better tax benefits, you can restart your financial journey.

Consolidating your loans would not solve everything overnight, but it will give you back a sense of control. You will know exactly what you owe, how you're paying it off, and slowly, the stress starts to ease. After all, it is one EMI, one due date, and one less thing to panic about at 2 AM. If you have been waiting for a sign—this is it.
 

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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?