What Is a Debt Consolidation Loan?
A Debt Consolidation Loan allows borrowers to combine multiple debts such as credit card balances, personal loans, or other liabilities into a single loan with a fixed interest rate and tenure. This helps simplify repayments and may reduce the total interest burden.
Key Features of Debt Consolidation Loans
- Combine multiple debts into one loan
- Lower interest rates than credit cards
- Fixed repayment schedule
- Reduces monthly stress by having a single EMI
- Available as personal or secured loans
Interest Rates 2026
Rates depend on lender, loan type, and creditworthiness.
| Lender Type |
Interest Rate (p.a.) |
Loan Amount |
Tenure |
| Public Sector Banks |
10% – 14% |
Up to ₹10 lakh |
12–60 months |
| Private Banks |
11% – 16% |
Up to ₹15 lakh |
12–60 months |
| NBFCs / Digital Lenders |
12% – 20% |
Up to ₹5 lakh |
6–36 months |
Eligibility Criteria
- Age between 21–65 years
- Regular income source
- Good credit history (CIBIL 650+ preferred)
- Indian resident
- No ongoing legal cases affecting finances
Documents Required
- Identity proof (Aadhaar, PAN, Passport)
- Address proof (Utility bills, Voter ID)
- Income proof (salary slips, ITR)
- Details of existing debts for consolidation
- Bank account for EMI debit
Debt Consolidation Loan EMI Example
If you consolidate ₹5,00,000 of multiple debts into a 36-month loan at 12% interest:
- Monthly EMI: ₹16,600 approx.
- Total interest payable: ₹99,600 approx.
- Total repayment amount: ₹5,99,600 approx.
Advantages and Disadvantages
Advantages
- Simplifies multiple EMIs into one
- Potentially lower interest rates
- Fixed repayment tenure
- Reduces stress and improves financial planning
Disadvantages
- May involve processing or foreclosure charges
- Approval depends on income and credit score
- Improper use may increase total debt
How to Choose the Best Debt Consolidation Loan in 2026
- Compare interest rates and processing fees
- Check tenure and EMI flexibility
- Verify lender reputation and transparency
- Ensure all debts are eligible for consolidation
- Read all terms & conditions carefully
Frequently Asked Questions (FAQs)
What debts can be consolidated?
Credit card bills, personal loans, and other unsecured loans can usually be consolidated.
Is collateral required?
Most consolidation loans are unsecured; some large loans may require collateral.
How fast can I get approval?
Approval typically takes 2–7 business days depending on lender and documentation.
Can I prepay the loan?
Yes, prepayment is allowed in most cases, sometimes with nominal charges.
Author: All Finance Store Debt Solutions Team
Expertise: Personal & Consolidation Loans
Last Updated: January 2026
Disclaimer: This page is for informational purposes only. Debt consolidation loan terms, interest rates, and eligibility vary by lender. Always verify details with official sources before applying.