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Debt Consolidation Loan

Consolidation Loans

Last Updated 14th Aug 2020

6th August 2020 – RBI keeps Repo Rate unchanged at 4%

Interest Rate 10.50%
Minimum Monthly Income ₹ 25,000
Maximum FOIR Upto 65%
Flexible Tenure Upto 72 months
  • Consolidate outstanding balance of multiple credit cards.
  • Consolidate multiple loan amount outstanding.
  • Reduce your total interest amount outgo.
  • Check Best Offers on personal loan starting @10.50%*

Loan For Debt Consolidation

A debt consolidation loan is availed to replace multiple loans or credit with one. It benefits in the form of one EMIs in place of two or three and also reduce the interest amount outgo. Debt consolidation loan can be of four types:

  • Loan from family/friends: You can opt to take a loan for family or friends to consolidate your debt. A mutual agreement of repaying the loan in monthly EMIs might work wonders to get the amount you need.
  • Personal Loan: One of the best ways or options to consolidate debt is by using a personal loan.
  • Credit Card Balance Transfer: In case you have multiple credit card balances outstanding, you can opt to balance transfer those amounts into one credit card. You can transfer the balance into the card, which has a low-interest rate.
  • Loan Against Property: You can opt to take a loan for family or friends to consolidate your debt. A mutual agreement of repaying the loan in monthly EMIs might work wonders to get the amount you need.

Personal Loan for Debt Consolidation

A personal loan is a popular credit product in today’s time owing to its flexibility of use. Marriage expenses, travel expenses, purchase of consumer durable are some of the common uses for which people avail of the personal loan. However, one of its beneficial strengths is its capability to be a debt consolidator. This means when you have multiple loans going on, and the weight of EMIs is putting extra pressure on your pocket, you can choose to avail personal loan and pay off the other ongoing loans to reduce the monthly burden and bring them under one EMI.

Top Banks and NBFCs offering Personal Loan

Bank Personal Loan Interest Rates Lowest EMI Per Lakh
SBI Personal Loan 10.50% ₹ 1,878 for 72 months
HDFC Bank Personal Loan 10.75% ₹ 2,162 for 60 months
ICICI Bank Personal Loan 10.75% ₹ 2,162 for 60 months
Bajaj Finserv 12.99% ₹ 2,275 for 60 months
Citibank 10.50% ₹ 2,149 for 60 months
IDFC First Bank 10.99% ₹ 2,174 for 60 months
Axis Bank 10.99% ₹ 2,174 for 60 months
Tata Capital 11.25% ₹ 1,916 for 72 months
Fullerton India 11.99% ₹ 2,633 for 48 months
IndusInd Bank 11.00% ₹ 2,174 for 60 months
Kotak Bank 10.75% ₹ 2,572 for 48 months
RBL Bank 13.99% ₹ 2,326 for 60 months
IIFL 12.99% ₹ 2,275 for 60 months
HDB Financial 13.99% ₹ 2,326 for 60 months
Corporation Bank 12.95% ₹ 3,367 for 36 months

Reasons to Choose Personal Loan Consolidation

Bringing your multiple debts under one loan can save you a lot of interest money if you do it effectively. Here are some reasons that could motivate you to consider debt consolidation:

  • Low Interest Rate: There are significant chances that your new rate of interest would be considerably lower than your present interest rate. When this is the case, opting for debt consolidation through personal loan is a good option. However, make sure you do a proper analysis of the difference in the interest rate and your monthly payment if you get the loan as compared to what you are paying at present.
  • Fixed Repayment Tenure: Personal loan is available for 1 to 5 year period. When you know the exact that you need to pay each month to repay the loan within the stipulated time, you can repay the loan easily.
  • Single EMI: Keeping track of the various due dates to pay EMI is tedious. Missing even one EMI can cause you to pay the penalty along with hampering your credit score and relationship with your bank. Such hassles can be avoided by consolidating your debt from various lenders to one. It will make your Personal loan EMI payment much more comfortable and hassle-free.

Features of Debt Consolidation for Personal Loan

The key features of personal loan for debt consolidation or the reasons why you should opt for a personal loan to consolidate your debt are:

  • Online Application: Many personal loan lenders provide the facility of online application on their website. You can also opt to apply for a personal loan for debt consolidation through our platform as well, where you will get the best offers based on your eligibility from 15+ lenders.
  • No Collateral: To avail personal loan, you are not required to pledge any security or collateral with the bank or any other lender. This is unlike other loans (home loan, loan against property) for which it is mandatory to submit a collateral.
  • Prepayment: Personal loan lenders also offer a facility to prepay your personal loan after a certain fixed/lock-in period. Although some lenders may also charge a nominal fee for prepayment, it is also likely to help you pay off the loan quickly.
  • Timely Approval: The approval process of a personal loan is quick in almost all lenders. As soon as the documents are verified, you are informed about the status of your application as to whether it is rejected or accepted.
  • Flexibility: You enjoy the flexibility of choosing the tenure of the loan. You can choose any period between 1-5 years to repay the loan. Also, consider borrowing the loan amount with which you can completely pay off your loan.
  • Quick Disbursal: The loan amount is usually disbursed in a week after you submit your application with proper documents. The loan amount is transferred in a savings account as soon as your loan is sanctioned.

Does Debt Consolidation Affect Credit Score?

Managing multiple debts and keeping track of various EMIs and making timely payments is a tedious task. You can easily miss any due dates, and late payment will attract penalty charges as well. Besides, missing the due date of payment will also lead to a negative entry of late payment on your credit report, which will affect your credit score negatively.

However, you can avoid all this by borrowing a personal loan and consolidating your debts. It will make payments of your debt easier, as you will have only one EMI to pay each month. This will also significantly reduce the chances of missing a payment. Thus, making regular and timely payments of your EMI will have a positive impact on your credit score.

Important Points to Consider While Taking a Personal loan for Debt Consolidation

The decision to avail of a personal loan for debt consolidation should be based on proper analysis and understanding of the impact of it on your financials. Here are the points to consider before borrowing personal loan:

  • Eligibility Criteria: Meeting eligibility criteria is the most important aspect. To avail of the personal loan, you must meet the lender’s eligibility criteria. Thus, check the eligibility criteria of the lender before you apply for the loan. Aspects like, income, age, work experience, current company, existing debts are some of the points based on which lender decide their eligibility criteria.
  • Existing Debts Tenure: Make sure you check the tenure of existing debts before jumping on the decision of availing the personal loan. In case you think that you can repay the debt within the next few months or a year, then opting for debt consolidation is not the right option for you.
  • Interest Rate and Other Charges: The rate of interest for a personal loan varies between 10.50% to 36.00%. Therefore, comparing the interest rates of various lenders is highly recommended before deciding for the bank or financial institution in which you want to apply.
  • Repayment Tenure: In case of personal loan, you can choose any tenure between 1 year to 5 years for repaying the borrowed sum. Assessing the repayment capacity is crucial to deciding the loan tenure, especially when you are borrowing to consolidate your debts.
  • Credit Score: The rate of interest in the case of a personal loan depends a lot on credit score as well. A good credit score will land you with a competitive or low-interest rate as compared to the rate of interest offered in case of bad credit score. It is advisable to proceed with your personal loan application only when you have a good credit score.

Balance Transfer vs. Debt Consolidation

When you want to repay a large amount of debt, there are two options to consider; balance transfer or personal loan debt consolidation. But how to ascertain which one is best for you?

A Personal Loan balance transfer lets you transfer your loan from the current lender to another. It is useful when you are paying interest at a significantly higher rate than what is available in the market.

In case you have multiple debts and credit card payments, then the option of borrowing a personal loan to consolidate debts is much better, as it will ease your work from paying multiple EMIs to a single one along with reduced interest cost.

To avail of a personal loan, you do not need any collateral, nor is there any commitment for a specific use of the borrowed funds. There are various financial institutions and banks which provide the personal loan with flexible repayment terms. Make sure you check your eligibility for the personal loan before you apply for it.

FAQs

Can I get a loan for debt consolidation?

Yes, you can consider availing a personal loan to consolidate your debts. However, firstly you need to assess your eligibility and analyze whether you will get the loan at a significantly lower rate of interest than your current debts and the amount of loan you are eligible for.

Is it smart to get a personal loan to` consolidate debt?

Consolidating your debts to one loan at a lower rate of interest will reduce the number of EMIs you have to pay each month along with reducing the interest amount outgo. Therefore, it is smart to get a personal loan to consolidate debt.

When should you consolidate debt?

When you have multiple credit card or loan balance outstanding, and the amount you are paying in EMIs is taking a toll on your monthly budget.

What is a good credit score for a consolidation loan?

To consolidate debt, a personal loan is the best option. A good credit score to avail the personal loan is 720 or above.

What is the processing fee for debt consolidation loan?

The processing fee for debt consolidation loan is Upto 2.25% of Loan Amount.

What are the requirements for a debt consolidation loan?

The requirements for a debt consolidation loan varies from bank to bank. However, some of the basic requirements of a debt consolidation loan are:

  • The fixed obligation to income ratio for the applicant should not be more than 65%.
  • Minimum monthly income required is ₹ 25,000
  • The age of the borrower should be between 21 to 65.
  • You should be receiving a salary either through bank transfer or cheque.

Do I need collateral for a debt consolidation loan?

A debt consolidation loan or personal loan does not require any collateral. It is an unsecured loan, that’s why the importance of a good credit score to avail the loan is much more as compared to secured loans.


Personal Loan News - Aug 2020
  • 2020-08-11 : Bank of Baroda reported a net loss of ₹864 cr in Q1 news
    Bank of Baroda posted a net loss of ₹864 crores for the three months to June, owing to higher provisions for loans. Net interest income backed by retail loans like home, personal, gold, car, two-wheeler and gold loans along with business and mudra loans increased 5% y-o-y to ₹6,816 crores in Q1 FY21. Further, The total advances grew 8.6% y-o-y to Rs. 7.36 trillion.
  • 2020-08-07 : DCB Bank Ltd posted Rs. 79.38 crore PAT in Q1FY21 news
    DCB Bank posted a net profit of Rs.79.38 crores for the period ended June 30, 2020, as against a net profit of Rs.68.76 crores for the period ended March 31, 2020. In addition to this, the Bank reported a total income of Rs.950.70 crores backed by retail loans like home, personal, gold, two-wheeler, and car loans along with business and mudra loans during the period ended June 30, 2020.
  • 2020-08-06 : SBI reports Q1FY21 net profit of Rs. 4776.50 crore news
    State Bank of India reported a net profit of Rs.4776.50 crores for the period ended June 30, 2020, as against a net profit of Rs.6909.95 crores for the period ended March 31, 2020. The Bank posted a total income of Rs.87984.33 crores backed by retail loans like home, personal, car, two-wheeler, and gold loan along with the business and mudra loans. Further, the bank total deposits which include FD, RD, current and savings account grew at 15.96 per cent YoY.
  • 2020-08-04 : UCO Bank reports Rs. 21.46 crore PAT in Q1 news
    UCO Bank posted a net profit of Rs.21.46 crores for the period ended June 30, 2020, as against a net profit of Rs.16.78 crores for the period ended March 31, 2020. The bank reported total income aided by retail loans like home, personal, car, two-wheeler and gold loans along with business and mudra loans of Rs.4436.57 crores during the period ended June 30, 2020. In addition to this, total deposits which include FD, RD, current and savings accounts increased by 1.4% to Rs 1,95,119.60 crore.
  • 2020-08-03 : Dhanlaxmi Bank Ltd Q1FY21 net profit at Rs. 6.09 crore news
    Dhan Laxmi posted a net profit of Rs.6.09 crores for the period ended June 30, 2020, as against a net profit of Rs.2.60 crores for the period ended March 31, 2020. In addition to this, The bank reported a total income bolstered by retail loans home, personal, car, two-wheeler and gold loans along with business and mudra loans of Rs.278.62 crores during the period ended June 30, 2020. Bank provisioning for bad loans and contingencies spiked to Rs 37.02 crore during the reported quarter of FY21 as against Rs 9.27 crore a year ago.
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