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Anishka Bhadly
Anishka Bhadly, working at Loansjagat, is a content writer with a finance and business background. She has completed her bachelor's degree with a specialisation in finance and is currently pursuing an MBA in the finance field too. The knowledge she has gained from her studies and experience working with EdTech companies helped her combine theoretical knowledge with practical industry insight. Her expertise lies in creating well-researched, informative, and reader-friendly content in various banking, personal finance, loans, insurance, and investment-related topics.
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A debt consolidation loan is a new loan used to repay multiple existing debts — such as personal loans or eligible credit card balances — so you manage them through a single monthly repayment. LoansJagat, India's first loan consolidation marketplace, connects borrowers to 50+ banks and NBFCs to compare debt consolidation loan offers in one place, with loans up to ₹50 lakh and a fully digital application process.
Debt consolidation does not reduce or erase the amount you owe. It changes how that debt is repaid — and, depending on the new loan's interest rate, fees, and tenure, it may simplify repayment and reduce your overall borrowing cost.
Key Takeaways:
A debt consolidation loan is a financial product that combines multiple debts into one new loan or credit account. The funds from the new loan are used to pay off your existing debts, leaving you with a single monthly payment to manage.
For example: if you have three credit cards, a personal loan, and a medical bill, a debt consolidation loan lets you merge these into one account. Instead of making several payments every month, you make one payment to the new lender. The primary purpose is to simplify debt management and, where possible, reduce the total interest paid over time.
Also Read: How to get a single EMI for multiple loans?
A debt consolidation loan works by replacing multiple debt obligations with a single new loan. The process typically involves four steps:
Repay the new consolidated loan through one fixed monthly payment (EMI).
Most borrowers choose debt consolidation because it reduces the number of bills to track and helps avoid missed or late payments.
Borrowers in India prefer debt consolidation because it offers several practical advantages for day-to-day financial management:
Potential improvement in credit score over time through consistent, on-time payments.
Also Read: Debt consolidation vs Loan restructuring
Debt consolidation can make debt management easier, but it also carries certain drawbacks. Understanding both sides helps you make an informed decision before proceeding.
Benefits | Risks |
| May reduce interest costs if you qualify for a lower interest rate. | Applying for a new loan may temporarily lower your credit score due to a hard credit inquiry. |
| Combines multiple debts into one monthly payment, making repayment easier to manage. | A longer repayment period may increase the total interest paid over time. |
| Simplifies budgeting with one fixed payment and due date. | Using paid-off credit cards again can lead to additional debt accumulation. |
| Can lower your monthly EMI, depending on the loan terms. | Some lenders or debt consolidation companies charge high setup and service fees. |
| Consistent, on-time payments can improve your credit score over time. | Missing payments on the new consolidated loan can negatively affect your credit score. |
In summary, debt consolidation is a practical tool for simplifying repayment and often reducing interest costs — but borrowers should evaluate loan terms, fees, and total repayment amounts, not just the monthly EMI.
Eligibility for a debt consolidation loan depends on the lender's specific criteria. While requirements vary, steady income and a satisfactory credit score are the two most important qualifying factors across lenders.
| Eligibility Factors | Documents Required as Proof |
| Income | Proof of employment |
| Employment Status | Recent bank statements |
| Credit Score | Statements for the debts being consolidated |
| Existing Debts | Information from current lenders or creditors |
| Ability to Repay the Consolidated Loan | Any additional documents requested by the lender |
Meeting these requirements does not guarantee approval, as every lending institution maintains its own internal policies.
Salaried Applicants:
Existing loan statements
Self-Employed Applicants:
These two terms are frequently confused, but they refer to very different processes:
| Debt Consolidation | Debt Settlement |
| Combines several debts into one new loan | Attempts to reduce the total amount you owe |
| You repay the full debt amount | Creditors may agree to accept less than the full amount |
| Focuses on simplifying the repayment process | Focuses on negotiating a reduction in debt |
| Usually involves taking out a new loan | Usually involves direct negotiation with creditors |
Debt settlement companies do not offer direct loans. Instead, they negotiate with creditors to reduce the outstanding balance. This process can affect your credit profile significantly differently than a debt consolidation loan.
LoansJagat is India's first loan consolidation marketplace, serving over 10 lakh customers and having facilitated ₹2,000 Cr+ in debt consolidated to date. LoansJagat is rated 4.7/5 across 1,200+ reviews and is accessible across 10,000+ locations in India.
Rather than approaching banks individually, borrowers can use LoansJagat to compare personal loan and debt consolidation offers from 50+ banks and NBFCs in a single place — with loans up to ₹50 lakh and a 100% digital process.
Here's how LoansJagat matches borrowers to the right lender:
LoansJagat is best suited for borrowers managing multiple EMIs across different lenders who want to consolidate into a single, affordable payment without the burden of approaching each bank independently.
Bottom Line
A debt consolidation loan is one of the most practical solutions for borrowers struggling to manage multiple debt payments — particularly for those who qualify for a lower interest rate than what they currently hold. Debt consolidation simplifies repayment by replacing multiple monthly bills with one fixed EMI, which can significantly reduce financial stress and help borrowers stay on track.
That said, it is not a quick fix for underlying overspending habits. The best approach is to compare loan costs, fees, repayment terms, and your capacity to meet regular payments before committing to consolidation. When combined with responsible budgeting and disciplined spending, a debt consolidation loan can be an effective step toward stronger financial health.
Terms and conditions apply. Loan approval is subject to lender eligibility and verification.
Debt consolidation in India combines multiple loans or credit card balances into one new loan with a single monthly EMI. It may also offer a lower interest rate depending on your credit profile and the lender.
Debt repayment is the process of paying back borrowed money — including the principal amount and any applicable interest — according to an agreed schedule with the lender.
A longer loan tenure may increase the total interest paid over the life of the loan. Additionally, missing payments on the new consolidated loan can negatively impact your credit score.
Eligibility depends on your income, employment status, credit score, existing debt obligations, and your demonstrated ability to repay the new loan. Requirements vary by lender.
*T&C Apply
Avoid borrowing more than you need, choosing a loan with high fees or unfavorable terms, or using credit cards that have been paid off to accumulate new debt.
A personal loan with a lower interest rate and manageable monthly EMI is generally a suitable option for debt consolidation in India.
Yes, some lenders offer debt consolidation loans to borrowers with lower credit scores, but these typically come with higher interest rates to offset the lender's risk.
Alternatives include debt settlement, balance transfer credit cards, credit counseling, refinancing existing loans, or building a structured manual repayment plan.
LoansJagat is India's first loan consolidation marketplace. It analyses a borrower's financial profile — including income, credit score, and existing debt — and matches them against live offers from its network of 50+ partner banks and NBFCs. This means borrowers can compare multiple debt consolidation loan options in one place, rather than applying to each lender separately, and select the offer with the most favorable interest rate, tenure, and EMI. The entire process is 100% digital, takes less than two minutes to initiate, and requires no paperwork.
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