What is a debt consolidation loan?
How to consolidate debt in India
Do you go back to bed at night counting the number of bills you have to repay? Are you afraid that your CIBIL score will go down due to your existing debts? Are you scared of debt collectors? If so, then you can simply take out a debt consolidation loan and pay off your credit card bills, medical bills, house rent, and utility bills now. This consumer debt solution helps to alleviate your financial stress by giving you one loan to consolidate all your debts into a single monthly payment plan in India.
What is a debt consolidation loan?
This is a big loan that helps you to consolidate debt into one payment. To put it simply, consumer debt consolidation loans help you consolidate bills into one monthly payment.
How to consolidate debt with a loan in India
A debt consolidation loan is a single loan that you take out to combine the debt into one payment. Basically, you take out a new loan to repay your multiple bills. For instance, you have 7 loans with varied interest rates. The total loan amount is Rs.30,000. You make monthly payments to multiple lenders until all your loans are paid off. When you are unable to manage so many loans, you decide to take out a fresh loan and pay off all your existing loans. So, you take out a loan of Rs.30,000 and pay off your other loans. Thus, you have combined loans into one payment. Henceforth, you have to make monthly payments to a single lender.
When you consolidate debt into one payment, it becomes easier for you to manage your financial life. However, before you consolidate all debts with a single loan, you should keep in mind that you have to pay back the principal amount along with the interest. So, use a debt consolidation calculator to see if you can afford the payments.
Use a calculator to find out how much you have to pay on the total debt consolidation loan. Is it more than what you’re paying on your existing loans? Think carefully about this.
Usually, consolidation loans help to consolidate debts that are unsecured. These are credit card bills, hospital bills, utility bills, home rents, and any other unpaid bills.
What are the pros and cons of debt consolidation loans in India?
- Consolidate high-interest loans with a single loan
- Issue a single cheque every month
- Consolidated loan interest rate is lower than credit cards
- Save a lot of money
- Manage only one lender
- No need to face debt collectors
- Protect your CIBIL score
- Strict eligibility criteria
- The best debt consolidation rates are only available to people with a good income and a 700 plus CIBIL score
- You can’t save money if the interest rate is high
- You may have to pay more if the tenure is too long
How many types of debt consolidation loans can you get in India?
You’re spoilt for choice when it comes to consolidating bills into one monthly payment in India. Here are a few types of consolidation loans you can get in this country.
1. Unsecured debt consolidation loans
The best unsecured loans for debt consolidation are usually offered by banks and peer-to-peer lenders in India.
2. Credit card debt consolidation loan
Unfortunately, many people don’t know that low interest credit card consolidation loans are offered by banks. Hence, these loans are not as popular as personal loans.
Just like other loans, the best credit consolidation loans are given to borrowers with good CIBIL scores. So, if you want to get the best credit card consolidation offers, then try to improve your CIBIL score first.
3. Bill consolidation loans
The best bill consolidation loans have modest interest rates and easy EMIs. So, you should always strive to qualify for them.
4. Student loan consolidation
5. Secured debt consolidation loans
6. Business debt consolidation loan
7. Personal loan consolidation
Some banks offering personal debt consolidation loans are Axis Bank, HDFC Bank, Citibank, and ICICI Bank. Depending on various factors, you can get a loan amount up to Rs 40 lac. The interest rate varies between 10% and 24%. The loan term usually stretches from 1 year to 5 years. You can choose a repayment tenure as per your choice. And, don’t forget that you have to pay a 2% to 3% processing fee to the personal loan consolidation companies. Before taking out a loan, check if you have to pay a prepayment penalty. Some banks allow you to prepay the loan without any penalty.
Shop around for best low interest personal loans for debt consolidation in your city. Unless you fit the lender’s requirements, you won’t qualify for the best personal loan rates for debt consolidation. Keep this fact in mind. If the interest rate is not lower than your plastic cards, then it doesn’t make sense to take out a personal loan to consolidate credit card debt.
8. Home equity loan for debt consolidation
Where to get a debt consolidation loan in India
Are you wondering where to go to consolidate debt? Well, you can get a loan from banks, peer-to-peer lending companies, and debt consolidation loan companies. Lend Club and Lendbox are a few notable peer-to-peer lending companies. On the other hand, financial institutions like Bajaj Finserv offer consolidation loans at attractive interest rates. They offer various types of consolidation loans with fixed EMIs to replace your multiple bills that drain your savings.
Which Indian banks offer debt consolidation loans?
Yes. Banks do offer consolidation loans. As per the financial experts, the best banks for consolidation loans are HDFC bank, ICICI Bank, Citi Bank, Kotak Mahindra Bank, etc. These are popular banks in India. However, it doesn’t mean that these banks are the best place for debt consolidation loans in your city just because the financial experts feel so. Some local banks might give you a better deal since they always want to come into the limelight.
You have to see what they are willing to offer you. If the offers are not good, then you have to explore other debt consolidation places.
The best place to consolidate debt is the one that helps you to pay off your unpaid bills quickly, save money, and reduce your stress.
Documents you need to submit to get the best debt consolidation loans
- Your payslips for the last 3 months
- Your employee identity card
- Last 3 months record of your bank account statements of your salary account.
- Your KYC documents, which include address proof, identity proof, etc.
- Your work experience certificates. The best debt consolidation loan companies prefer borrowers with 2-3 years of work experience.
How to get a debt consolidation loan fast in India
Many people ask this question in Quora and other financial forums that “How can I get a debt consolidation loan to consolidate my debt, and that too fast? “
Well, it is easy to get a debt consolidation loan fast when you fulfill the following eligibility criteria:
The best way to get a debt consolidation loan is to fill out the application form accurately. Many people give false information just to qualify for the loan. But this is not the right process. Banks that offer debt consolidation loans check all the details you have submitted. They will check the authenticity of your documents, and may even enquire at your office. So, it’s better, to tell the truth, up front. Otherwise, your application form may get rejected.
What is the smartest way to consolidate debt?
As you must have noticed, there are various debt consolidation options for you. But the best way to consolidate debt with a loan is to find a lender who agrees:
01
To approve your loan application instantly.
02
To offer you a loan without any collateral.
03
To offer a loan with a moderate interest rate in your city.
04
To credit money into your bank account within 24 hours.
05
To accept a loan with minimum paperwork.
06
To create a client portal where you can view your payments.
07
To give you the desired loan amount.
08
To offer a repayment plan between 3 months and 36 months.
How do you get the cheapest debt consolidation loan?
This is one of the most frequently asked questions in India.
Everyone wants to know how to get affordable debt consolidation loans. Well, the easiest way to get low interest rate debt consolidation loans is to showcase your creditworthiness in front of the lenders. If your credit score is around 750 and your income is between $20,000 and $32,000, then you may qualify for low cost or low apr consolidation loans.
Another trick to qualify for the best consolidation loan rates is to apply for secured loans. Lenders are less at risk on these loans. They charge reasonable interest rates on them.
What are the best debt consolidation loans in India?
If you want to consolidate debt into one monthly payment, then you should try to work with the top-rated debt consolidation companies in India. The reason is simple. They offer the best debt consolidation deals to borrowers. However, there is one problem. How would you know which are the best deals for you? Every lender will claim that he is giving you the best deal. But that doesn’t necessarily mean it’s true.
Before making the final decision, you should always check the terms and conditions of a loan. The top-rated debt consolidation loans usually have the following features:
1. One easy EMI
2. Fixed interest rates
The best credit debt consolidation companies usually offer fixed interest rate loans. These are the best loans for repaying your bills.
3. Fast approval
4. No prepayment penalty
The best loan consolidation companies won’t charge extra money for closing the loan before the term is over.
5. Short loan term
Are consolidation loans in India worth it?
Is it best to consolidate debt with a loan? Well, taking out a loan to consolidate debt is worth it when you can lower your interest rates. Otherwise, it’s a bad idea. The lowest interest rate debt consolidation loans can help you to save money. However, if the repayment plan is long, then you will spend more than what you save. Moreover, the eligibility criteria as mentioned above are quite high. You may not get top debt consolidation loans just because of your short working experience.
There are a few other factors that you have to consider. For instance, no matter what happens, you have to save money for emergencies. Otherwise, any unforeseen circumstance can force you to take out another loan or use credit cards. You’ll never be out of debt.
How hard is it to get a consolidation loan in India?
Is it hard to get a debt consolidation loan? The honest answer is, ‘yes.’
Easy debt consolidation loans are a myth in India. Lenders will verify your creditworthiness before giving you a loan.
Most debt consolidation lenders will check your CIBIL score when you submit your loan application. If your CIBIL score is above 750, then you may qualify for a consolidation loan. However, if your score is below 700, then you won’t qualify for a low interest rate debt consolidation loan. You may qualify for a secured or high-interest loan. Some lenders offer private debt consolidation loans. You can explore that option.
If you want to consolidate your loans, you probably want to do it for any of these reasons. You want to get rid of high-interest loans or you can’t manage multiple bills. If you have not been able to manage your bills properly, then there is a high chance that your credit score is low. Then, think logically? Will you qualify for a low rate consolidation loan? What will you gain if you have to again pay high-interest rates?
Next time anyone asks you, ‘is it easy to get a debt consolidation loan?’ Give him only one answer. It’s easy only for those consumers who have a good credit history. Low interest debt consolidation loans are only for those with good credit scores.
In India, should you go for long-term debt consolidation loans?
Long-term debt consolidation loans usually have low-interest rates in India. Debt consolidation loan providers charge low-interest rates as repayment terms are too long. However, if you sit with a debt consolidation loan calculator and start crunching numbers, then you’ll understand that these types of loans are not profitable. They may be the easiest way to consolidate debt but not a profitable one for consumers since they end up paying way more than what they originally owed after 10 years.
A 5-year debt consolidation loan will have a higher interest rate than a 10-year debt consolidation loan. Again, a 25-year loan will have a lower interest rate than a 10-year loan. The key point is the number of years. The longer your repayment term, the more you have to pay to the lenders.
Can you get debt consolidation loans with bad credit?
Debt consolidation loan providers don’t love to work with people who have bad credit. And even if they do agree to work, they offer bad credit consolidation loans, which have high-interest rates.
Debt consolidation loans for people with bad credit are not a feasible option due to high-interest rates. Some lenders offer only secured consolidation loans for bad credit. This means loan defaulters could lose their assets in the future.
Instead of looking for debt consolidation loans for poor credit, borrowers should take the following steps for debt financing:
Do consolidation loans hurt your credit score in India?
A consolidation loan won’t hurt your credit score in India provided you make monthly payments on time. The trick is to manage your new loan responsibly. As you make timely payments, your CIBIL score gradually goes up. Moreover, as you pay off your existing debts, your credit utilisation ratio goes down. This is considered a good sign in India. It helps to boost your credit score.
One missed payment can hurt your credit score. So, make sure you don’t miss a single EMI.
What’s the catch with debt consolidation?
The biggest catch is the loan term. No matter how low the interest rate is, it won’t do any good if the loan term stretches over several years. You’ll end up paying almost double or triple the loan amount. Look at home loans. They usually come with low-interest rates, but borrowers end up paying almost double the loan amount after completing the repayment term. The same thing happens with consolidation loans.
Another catch is that you have to change your spending habits. If you can’t change that, then it will be difficult to repay the new loan also. Remember, your debts have not yet been wiped out. You’re still in debt.
How can you find safe debt consolidation loans?
With so many scams and fraudsters lurking around, it’s important to opt for the loans that are safe and secured. The features of safe loans are given below:
Should I get a debt consolidation loan?
This is an important question. Well, the answer depends on your financial situation. If you’re sure that ‘I need a loan to consolidate my debt’, then only you should approach the lenders. It’s better to consider a loan when you’re unable to settle your debts or consolidate bills through a program. These debt relief solutions have easy eligibility criteria. Plus, the risk factors are much less than consolidation loans. You can also easily qualify for these programs with a poor credit score.
What is the average interest rate for debt consolidation loans in India?
The average debt consolidation loan interest rates vary between 7% and 12%. Everything depends on how you present yourself to debt consolidation lenders. If you portray yourself as a good and responsible borrower, then you can get a low-interest rate.
How much debt consolidation loan can I get?
It depends on your income and creditworthiness. If you have a poor credit score and low income, then you’re likely to get small debt consolidation loans. However, if you have a good credit score, high annual income, and a stable job, then you’re likely to qualify for big or large debt consolidation loans in India. The loan amount can be anything between Rs 3000 and Rs 5 lac. Some companies that offer debt consolidation loans may even offer up to Rs 15 lacs to borrowers.
Can you apply for debt consolidation loans online?
Many things have changed since the pandemic. Social isolation has compelled people to do financial transactions online.
You can apply for debt consolidation online. The process is simple, and you can complete it with a few clicks. Just go to the debt consolidation loan lender’s website and browse through its various sections at once. Read the terms and conditions of the loans. The website may claim many things, but you need to verify the facts first.
Check out the debt consolidation reviews first. Find out what the existing customers are saying. Do they feel that the website offers the best online debt consolidation loans? What are their experiences and suggestions? Get a detailed idea from there.
Once you have verified all the details, you can fill up the online consolidation loan application form.
What are the top 8 debt consolidation tips from experts?
There are various aspects of consolidation loans, which are quite tough to understand. One wrong step can hurt your financial life. We have prepared a list of tips based on top debt consolidation recommendations from experts. Here you go.
Well, this is the debt consolidation advice that experts have given you. Before you consolidate all loans, make sure you go through these tips once.
When is debt consolidation good for you in India?
Is it good to consolidate loans in India? Yes, it’s a good option especially when you’re in a financial crisis and want to pay back your creditors. At least, you’re getting an option to combine bills into one payment, which is quite easy to manage. You don’t have to borrow money from your friends and family. In India, you know how difficult it is to get a personal loan from relatives. They start avoiding you the moment you request them to give you a loan. A consolidation loan saves you from this ordeal. You can borrow money from banks and pay back your creditors.
Usually, it’s good to consolidate debt when you’re sure of the fact that a single loan with a low-interest rate is the solution to your financial problems. You should also be sure of your borrowing capability because good consolidation loans are only available to people with stable incomes and good credit scores.
Can you get a no interest debt consolidation loan in India?
Debt consolidation interest rates vary from bank to bank. Plus, much depends on your income and credit score. Usually, the interest rates are low, which you already know by now. The best loan consolidation companies usually charge low consolidation rates. Moreover, some of them charge a 0 percent interest rate in the first month. But that is all.
Interest free debt consolidation loans exist only in your dreams. Banks and P2P companies are here to make money. Their main source of income is from the interests that you pay.
How can I find debt consolidation loans near me?
- Visit your local banks and ask if they offer such loans.
- Ask your friends to suggest some local debt consolidation loan companies.
- Browse through the local directories.
Where can you get debt consolidation loan information?
You can get free debt consolidation information from debtfree.in. There are various financial resources available on how to consolidate debt, what banks offer debt consolidation loans, when to consolidate bills, the best way to consolidate debt, etc. You can read articles online to solve your doubts. We always strive to provide comprehensive and authentic information to our readers.
Other than Debtfree.in, you can also find information from various financial forums. Post your questions when you need help with debt consolidation loans. The forum members will give answers to questions. Questions can be anything related to debt consolidation like what is the best place to get a debt consolidation loan or can you get 1 crore consolidation loan in India or what happens if you default on the loan? The forum members will reply to your questions.