Can I Consolidate Two Personal Loans?

Personal loan consolidation lets you combine two personal loans into a single loan with one EMI. It works best when the new loan carries a lower interest rate than your existing loans combined. Banks like SBI and HDFC Bank offer this, and marketplaces like LoansJagat let you merge multiple loans in one application.

Key Takeaways

• Combining two personal loans into one may reduce your EMI outflow and also consolidate your repayments into a single date if your revised interest rate is lower than your average rate of interest.
• The Reserve Bank of India (Pre-payment Charges on Loans) Directions, 2025, prohibit foreclosure charges on floating-rate personal loans, which makes it cheaper to close your old loans to consolidate from January 1, 2026.

If you are managing two personal loans and two different maturity dates, you are not the only person. Many salaried earners in cities like Delhi, Mumbai, and Bangalore end up taking a second personal loan for events such as a marriage ceremony, a hospital bill, or a house repair when they are still paying off their first personal loan. This article seeks to explore who can consolidate two personal loans, how the process is done in India, the cost of consolidation, and an example of repayment after consolidation.

What is personal loan consolidation?

Personal loan consolidation means replacing two or more personal loans with a single new loan. The new loan pays off your existing balances directly to the old lenders. You are then left with one EMI, one due date, and one lender to deal with. This differs from a balance transfer, which usually moves just one loan to a new lender at a better rate. 

Consolidation is built specifically to merge multiple debts, including personal loans and credit card dues, into one account. LoansJagat's debt consolidation product allows borrowers to merge up to 50 personal loans, short-term loans, and credit card outstanding balances into a single EMI.

Why Should I Consolidate Two Personal Loans in India?

Consolidating two personal loans can help you pay off your debt faster, as you would only have to pay a single EMI with a single due date. Additionally, you may also be able to reduce your interest outlay if you can get a lower rate of interest. Banks and NBFCs offer personal loan consolidation in the form of a regular personal loan, a consolidation loan, or a top-up loan, and your eligibility depends on your income, credit score, existing EMIs, and repayment history. Make sure to mention consolidation as the purpose when availing of a personal loan to consolidate your existing personal loans, if the lender allows. LoansJagat lets borrowers compare consolidation loan offers from over 50+ banking partners on a single platform.

How Does Personal Loan Consolidation Work?

The process has four steps: list your outstanding loans, apply for a new loan large enough to cover both, get the new loan approved, and close the old loans with the disbursed funds.

1. List both loans with their outstanding balance, interest rate, and remaining tenure.
2. Add both balances to get the total amount you need to borrow.
3. Apply to a bank or NBFC for a personal loan of that amount.
4. Use the payout to close both existing loans and start paying a single EMI on the new loan.

Most lenders disburse the consolidation loan directly to your bank account within two to five working days after approval, based on standard personal loan processing timelines followed across NBFCs and banks.

Who Can Opt for Loan Consolidation for Personal Loans?

One needs to have a steady salary income, a credit score of 700+, and a minimum of one year of work experience to opt for a consolidation loan.

According to the eligibility requirements of LoansJagat for debt consolidation loans, one needs to be:

• Age between 24 and 54 years
• Having a minimum monthly income of ₹60000
• Having a credit score above 700+
• Being an employee and having a minimum of one year of work experience
• Non-salaried individuals usually need to have business continuity of 2 to 3 years in addition to their tax returns because of different evaluation criteria.

Note: The above-mentioned criteria may vary from different banks and financial institutions. Each bank, financial institution, and lender has their own criteria; borrowers must check the eligibility before applying. 

What is the best way to consolidate two personal loans in India?

The best method is to compare consolidation options among different lenders and select the one with the lowest all-inclusive rate and without any foreclosure fees.

Here is the sequence that one can follow:

• First of all, check the credit score before applying because a good credit score directly gives lower interest rates.
• Compare loan offers from at least three to four lenders and do not just stick to the offer from one's existing bank.
• Check whether your loans have floating rates of interest or not because, according to RBI's Directions 2025, foreclosure fees are not allowed on floating-rate loans for individuals taking personal loans for personal purposes.
• Always ask for the total cost of the loan, which includes the processing fee and GST charges on the loan.
• Select a tenure for which EMIs are affordable.

What Are The Benefits Of Loan Consolidation?

Debt consolidation consolidates multiple debts into a single consolidated loan that can make it easier to repay the debts and reduce financial burden if the consolidated loan offers attractive terms and conditions.

A few of the benefits that debt consolidation may offer include:

1. Lower interest: Consolidation loans help in lowering the amount of interest paid on the debt. In turn, this lowers the amount of payment made towards the principal amount due or outstanding.
2. Faster payback: Since the amount of interest paid towards the consolidated loan is lower, the amount of payments made towards the principal of the consolidated loan is higher. This higher payment reduces the payback period of the consolidated loan.
3. Enhanced credit profile: Making timely payments on the consolidated loan enhances one’s credit profile.
4. Simplicity: The consolidated loan has more manageable payments than other types of debts. For instance, consolidated loans have a set-up monthly EMI that makes it easy to manage payments.

Debt consolidation makes debt repayment easy and manageable. However, it is important to compare the interest rates, fees, and repayment terms of various consolidation loans before considering one of them.

Personal Loan Consolidation vs. Balance Transfer: What is the Difference?

A balance transfer and a personal loan can both assist with clearing the client's debt, but their maturity and repayment plans differ, and their scope of purpose is also different. Below is a table that compares the main features of a balance transfer and a personal loan.