How I Reduced my EMI by ₹12,000 Using Debt Consolidation?

The following is an illustrative example showing how debt consolidation can help reduce monthly EMIs.

Imagine paying ₹36,000 in EMIs every month and struggling to manage finances. But when you combine loans into one, your EMI dropped to ₹24,000, and you are saving ₹12,000 every month.  

This story isn't imaginary. Many people struggle with the same issue. But there is a solution to their problem. Borrowers can combine all their loans into a single loan with a lower interest rate and a longer repayment period. This method is called debt consolidation. Borrowers can reduce their EMI by ₹12,000 Using Debt Consolidation. How? Let's understand. 

Key takeaways 
 

• Debt consolidation combines multiple loans into a single loan with one monthly EMI.
   
• You can lower your interest rate or extend the loan tenure to reduce your monthly EMI.
   
• With a single EMI payment, you can lower the chances of missing payments.
   
• You should always compare lenders, charges, and total interest costs before choosing a debt consolidation option.
   
• Debt consolidation may not always reduce the total repayment amount, but it can significantly improve monthly cash flow.

How are multiple loans making life stressful? 

Six months ago, I had an educational loan. Later, I took out a personal loan for my father's medical expenses. Then I used my credit card for home repairs. A few months later, I bought a scooty on EMI. 

These loans were manageable individually. But after some time, it became difficult. 

My monthly loan payment before debt consolidation was:

Read More - How to Reduce EMI of an Existing Personal Loan
 

My salary was not enough to bear ₹36,000 as EMI and other daily life expenses; then I  realised that I needed to change something.

What solution should this problem be found? 

I had read about debt consolidation in an online blog. The idea was simple. After debt consolidation, I didn't have to pay multiple EMIs; I would only have one EMI. 

So, I went to the lender, and the lender approved the application after reviewing the background and documents. The process was really easy. 

How does debt consolidation help reduce monthly EMI?

When the lender approved debt consolidation, my payment became like this.

After debt consolidation, I saved ₹12,000. It gave me breathing space. 

How to apply for debt consolidation?

Here are the steps with which I applied for debt consolidation. 

1. First, I checked eligibility criteria for debt consolidation. I noticed that lenders usually check borrowers' debt-to-income (DTI) ratio, monthly income, CIBIL score, and existing loan EMIs.
    
2. After that, I compared different lenders. I checked banks and NBFCs' processing fee, interest rate, loan tenure, and foreclosure or prepayment charges.
    
3. Then I gathered all the documents, which include Aadhaar, PAN, salary slip for the last 3 to 6 months, Form 16, and bank statements. 

Then my lender reviewed all the documents and approved debt consolidation. 

What changes after debt consolidation?

The biggest change for me was the reduction in EMI payment by ₹12,000. It was really a massive relief in my monthly cash flow. Other than this, there were some shifts in the financial situation. 

1. Earlier, I used to juggle a lot due to due dates, different interest rates, and the logistical headache of tracking various consumer credit products. Now I don't have to worry about these things. 
    
2. I replaced multiple loans with a single debt consolidation loan, making repayments easier to manage.
    
3. I had only one EMI to manage; it became easier to plan my repayments.

All the above changes I faced after debt consolidation. 

Why did I choose debt consolidation?

There are many reasons I chose debt consolidation.

1. The first reason for my debt consolidation was that I wanted to reduce my monthly EMI payment. 
    
2. There were high-interest-rate loans like credit cards. So I wanted to reduce my interest burden.
    
3. I couldn't afford the previous EMI amount, so I switched to debt consolidation 
    
4. Also, I didn't want to miss EMI payments and get penalized. 
    
5. Debt consolidation helped me improve my credit score. 

I chose debt consolidation because of the above reasons. It helped me save interest and stay motivated to become debt-free. 

What are debt consolidation loan benefits? 

Let me tell you about the benefits of debt consolidation. 

• Simplified Repayments: Now I don't have to track every EMI. I just need to do one single transaction.

• Lower Risk of Missed Payments: With debt consolidation, it reduces the chances of missing EMI payments because you only need to remember one due date.

• Better Financial Planning: After combining all EMIs into one payment, I felt relaxed and free to do other financial planning. 

• Potentially Lower EMI: With the debt consolidation method, if my new loan has a lower interest rate or a longer repayment period, my monthly EMI may decrease.

• Opportunity to Improve Credit Score: When I missed one EMI, it directly affected my credit score. But now, making timely payments on the new loan may help improve my credit score over time.

Also Read - How to Cut Your EMI by 50% 
 

So, debt consolidation isn't just a method; it is a stress reliever for you if you are struggling with multiple EMI payments

What are the risks of debt consolidation?

Debt consolidation isn't just about benefits. It has some negative sides too. 

• Higher Interest Rates: Even if debt consolidation is beneficial for me, lenders view this as an increased credit risk. Borrowers with weaker credit profiles may receive higher interest rates because lenders consider them a higher credit risk. 

• Additional Fees: Lenders can charge upfront processing fees or back-end foreclosure and prepayment penalties. This can quietly eat into your expected savings.

• Longer Repayment Period: Lower EMIs may result in paying more interest over time.

• Approval Is Not Guaranteed: A poor credit history can still result in loan rejection. This means there is no guarantee you will get approval for debt consolidation. 

Debt consolidation only helps if spending habits change. So, these were drawbacks of debt consolidation. You can compare and apply for debt consolidation. 

Who should consider it? 

Debt consolidation is not for everyone. It is for only those who have multiple loans in their name. Let me tell you who can go for debt consolidation. 

1. People with high-interest debt should definitely opt for debt consolidation because it reduces your interest cost.
    
2. If you are paying multiple EMIs and finding it difficult to manage. Debt consolidation is for you. 
    
3. If your credit score is more than 700, you can easily get debt consolidation. 
    
4. Also, if your monthly EMIs take up a large part of your salary, debt consolidation may reduce your monthly EMIs. It extends the repayment period or offers a lower interest rate.

Debt consolidation is effective when you avoid taking new debt. If you continue using your credit cards after consolidating your loans, you may end up with even more debt than before.

Conclusion 

So, initially I had to pay EMIs monthly, and it became very frustrating because a large part of my salary was going towards loan repayment. Then I chose debt consolidation. It simply combined all my loans into a single EMI. It reduced my monthly EMI payment by ₹12,000. It was much easier to manage. 

This is how debt consolidation works in real life. It combines multiple loans into one EMI. It improves your monthly cash flow. It can also help reduce your interest burden and lower the risk of missed EMI payments. 

If you are someone who is struggling, like I am, with multiple loans and finding it difficult to manage your monthly EMIs, debt consolidation could be a practical solution.

But before applying, compare different lenders, understand the total interest cost, check all applicable charges, and borrow only if the new loan genuinely improves your financial situation. Most importantly, avoid taking on new debt after consolidation so that you can move closer to becoming debt-free.

Frequently Asked Questions 

How did I reduce EMI by ₹12,000 using debt consolidation?

I used to pay ₹36,000 earlier; after debt consolidation, the EMI became ₹24,000 because I combined multiple loans into one single loan. 

Is debt consolidation better than managing multiple loans?

Yes, it is better than managing loans because it simplifies repayments, reduces EMI burden, and makes loan management easier.

Who should consider debt consolidation?

People like me who are struggling with multiple EMIs, high-interest loans, or repayment stress should consider it.

Will debt consolidation affect your credit score?

Yes, actually, it can improve your credit score over time.

Can I consolidate multiple loans?

You can consolidate personal, credit card, and other eligible loans can often be consolidated.

Does debt consolidation reduce the total loan amount?

No, it mainly reduces repayment burden by lowering EMIs or interest costs.

What should you check before choosing a debt consolidation loan? 

You should always compare interest rates, processing fees, tenure, and total repayment cost carefully.

Can I prepay a debt consolidation loan? 

Yes, many lenders allow prepayment, though some may charge a prepayment fee.

Can debt consolidation reduce my monthly EMI?

Yes, extending the repayment tenure can lower your monthly EMI, although it may increase the total interest paid over time.

Why do I need a call for debt consolidation?

The call helps verify your details, understand your existing loans, and match you with the right lender. It also gives you a chance to ask any questions before moving ahead.

Is debt consolidation the same as debt settlement?

No. Debt consolidation combines multiple debts into one loan, while debt settlement involves negotiating to pay less than the total amount owed.