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Tata Capital > Blog > Personal Use Loan > How Can You Consolidate Multiple Loans with the Help of Personal Loan

Personal Use Loan

How Can You Consolidate Multiple Loans with the Help of Personal Loan

How Can You Consolidate Multiple Loans with the Help of Personal Loan

Debts have their sneaky way of snowballing – you start out with one loan and then the other until it all piles up into this mountain that doesn’t seem to move.

If you’re in a similar position, you can go for consolidation of loans! By taking personal finance, you can merge different loans into a single one and make debt management far simpler. Such a process also allows you to take control of your loans and reduces stress levels significantly. However, that’s not it!

There are several more benefits to debt consolidation. Read more to find out.

What is Debt Consolidation with a Personal Loan in India?

You may be looking for the best consolidation loan, right? But before that, it’s crucial to understand what is debt consolidation. It’s helpful to know the basic debt consolidation meaning and how it works practically. 

A debt consolidation loan in India allows borrowers to combine multiple existing loans into one personal loan, creating a single EMI for easier management and potentially lower interest. Essentially, it’s like taking out a new personal loan equal to the total amount you owe across various loans. You then use this loan to pay off all your existing debts. So, instead of juggling several payments, you’re left with just one loan to repay each month

Key features include:

  • Replacing scattered high-interest debts with one structured loan
  • Simplifying payments through a single EMI and fixed tenure
  • Improving cash flow and financial control

Why use a personal loan for consolidation?

Given below are the reasons why taking personal finance for debt consolidation is a move in the right direction –

• Single EMI payment

When you opt for a personal loan for consolidation, all other dues are merged into a single amount, which you need to repay monthly. Thus, you don’t need to track multiple EMI dates or worry about defaulting on instalments, which can attract heavy penalties.

• Lower interest rate

Instead of paying different interest rates for multiple dues, you can take a new loan at a competitive interest rate and consolidate your debt. Doing so can also bring down your monthly instalments and make them more affordable.

• Fixed repayment tenure

Personal finance solutions typically have a fixed tenure that ranges from 1 to 5 years. Since you will need to repay the loan amount within the predetermined period, you can plan your finances accordingly and clear all your dues sooner. An online personal loan EMI calculator will prove handy for this.

• Improved credit score

Another upside of debt consolidation is that it gives a nice boost to your credit or CIBIL score. This happens because merging multiple loans into a single loan reduces your credit utilisation ratio, i.e., the amount you owe divided by your credit limit.

Though you may witness a slight, temporary dip in your credit score at the time you acquire a new loan, the long-term gains you see in your credit score, as well as savings on interests, will be worth it.

Is consolidation of dues the right option for you?

If you’re struggling to stay on top of your finances, then debt consolidation may be the option for you. However, to decide whether it is right, you must ensure the following –

  • Your existing dues must be high-interest debt, and consolidating them into a single loan must save you on interest charges
  • You have a repayment plan in mind to clear off your dues as soon as possible
  • You are willing to change your current spending habits

Who Should Consider a Personal Loan for Debt Consolidation?

Knowing who needs debt consolidation helps determine whether merging debts is the right step. An ideal candidate for personal loan consolidation typically has various high-interest dues and wants simpler repayment. It is most useful for borrowers who can commit to disciplined financial behaviour.
Individuals with following needs or characteristics can consider personal loan debt consolidation: 

  • Individuals managing multiple EMIs or credit card balances
  • Borrowers paying high interest and wanting reduced monthly costs
  • Those with steady income and good financial habits
  • Anyone seeking simplified budgeting through a single EMI

Eligibility Criteria for a Debt Consolidation Personal Loan

Before applying, borrowers should review eligibility for debt consolidation loan. An individual’s profile is considered eligible if it meets following personal loan for debt consolidation eligibility criteria:

  • Good credit score (usually 700+) and proven repayment track record
  • Stable employment and consistent income
  • Acceptable debt-to-income ratio (manageable existing EMIs)
  • Valid documentation and ability to repay after consolidation

Documents Required to Apply for a Debt Consolidation Loan

Applicants should prepare the necessary documents for debt consolidation loan. When applying digitally, online debt consolidation loan documents can be uploaded directly for instant verification. Usually, most lenders have similar documentation requirement. Tata Capital requires the following documents for a personal loan for debt consolidation: 

  • Identity proof: passport, PAN card or driving licence.
  • Address proof: utility bill, Aadhaar or bank statement.
  • Income proof: last 3 to 6 months’ payslips and Form 16.
  • Bank statements: salary credit evidence for 3 to 6 months.
  • Employment proof: employee ID, appointment letter or HR certificate (shows employer type impact on loan).

How to Apply for the Best Personal Loan for Debt Consolidation (Online Process)

To apply for online debt consolidation loan, borrowers must follow a structured debt consolidation loan application process offered by banks. This helps evaluate interest rates, tenure, eligibility, and EMI feasibility before finalising. Follow these steps to apply for loan for debt consolidation at Tata Capital:

  • Visit Tata Capital’s website or app and select the “Personal Loan for Debt Consolidation” option.
  • Use their online tools (EMI calculator / eligibility calculator) to estimate how much you can borrow and check terms. 
  • Complete the digital application, filling in your personal, employment and financial details.
  • Upload the required documents (identity, address, income/proof of employment) to verify your eligibility. 
  • Undergo e-KYC and credit assessment: Tata Capital will evaluate your profile and existing debts.
  • Receive approval and disbursement upon approval.

Potential Risks and Disadvantages of Debt Consolidation

Although debt consolidation is helpful, but borrowers must still review disadvantages of debt consolidation and understand possible pitfalls. Awareness of the risks of debt consolidation loan prevents financial setbacks and ensures the decision delivers genuine long-term benefits. The risks include:

  • Longer repayment tenure may increase total interest
  • Mismanagement can lead to accumulating new debt on top of the consolidated loan
  • Fees or charges may reduce cost savings
  • A new loan enquiry may temporarily impact credit score

Over to you

Do you fit the above criteria? Or wondering how to consolidate multiple loans into one? Do so with the lending experts of Tata Capital! With us, you can get a personal loan interest rate as low as 10.99%. Apply today and get one step closer to becoming debt-free.

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FAQs

Can debt consolidation improve my credit score?

Yes, when you apply for debt consolidation loan to combine multiple debts into one manageable EMI, it can reduce your credit utilisation and simplify repayments. This improves repayment consistency and lowers risk of missed payments, helping your score over time.

What types of debts can be consolidated with a personal loan?

Most unsecured debts can be consolidated, such as credit card balances, multiple personal loans, consumer durable loans or smaller high-interest borrowings. Lenders like Tata Capital offer personal loans specifically to repay such dues in one go.

Are there any hidden costs with debt consolidation loans?

Yes, you should watch for processing fees, early‐repayment charges or higher interest on personal loan for consolidation if not negotiated well. If the new personal loan for consolidation simply extends the tenure without lowering interest, the overall cost may rise.

What is the ideal interest rate for a debt consolidation personal loan?

Even if a debt consolidation loan in the market claims to be the best consolidation loan, the ideal rate they should offer is one that is significantly lower than your existing debts’ weighted average. For instance, Tata Capital offers personal loans starting around 10.99% for. However, always benchmark this against current liabilities.

How can I apply for an online debt consolidation loan with Tata Capital?

In order to apply for debt consolidation loan, go to the Tata Capital website, select the personal loan for debt consolidation option, fill in your details, upload documents, complete e-KYC and submit. The approval process generally takes 72 hours. However, this period may vary depending on the completeness of your application and the verification process.

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