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How to save money on EMI each month by consolidating your debt

  • Highlights

  • The process of debt consolidation is to combine multiple existing loans into one

  • This can not only make the repayment process convenient but also help you save money on EMI

  • We have jotted down a few ways how a consolidated loan helps you save money

Here’s an example of how your credit card dues and other loan payments can be clubbed together to reduce your monthly EMI and help you save money.

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Let’s say you have an active credit card for your personal and business expenses, and over time the balance has reached Rs.1 lakh with at the annual interest rate of 20%. You also availed a business loan of Rs.12 lakh 12% interest rate for a tenor of 1 year, to fuel the needs of your business. By consolidating your credit card debt and your business with a personal loan of 11% interest can help you save more than 8% on your monthly interest.

Here is how debt consolidation helps you save money:

1. It charges you lower interest
A personal loan charges you lower interest than what credit card companies charge on overdue bills. By consolidating your debt, you pay a fixed interest on a single loan that is lower than the interest you would have paid on multiple loans. This makes repayment of the loan in EMI more convenient. As seen in the example above, it also helps you save a significant amount of money on your EMI.

2. It erases the hassle of repaying multiple debts simultaneously
Multiple debts have varying rates of interest and repayment deadlines, and may not be affordable for you to pay. By consolidating your debt, you have a single loan with a fixed interest and one repayment schedule to follow, which becomes easier to manage.
3. It lets you choose the tenor based on your ability to repay
Personal loans are highly flexible. You can choose the repayment tenor, depending on your income. For example, borrowers who want to clear the loan faster could opt for a shorter tenor as compared to borrowers wanting to repay the loan slowly and comfortably. Usually personal loan tenors range from 12 to 60 months.

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4. It allows you to pick additional facilities like line of credit
Personal loans offered by certain lenders like Bajaj Finserv have a line of credit facility called Flexi Personal Loans, which not only makes debt consolidation easier, but also offers financing when you need it. A Flexi Personal Loan gives you access of a credit line of a certain approved sum, from which you can borrow as much as you need and whenever you need it up to the credit limit and within the tenor. You also pay interest only on the amount you borrow and not the entire credit line sum extended to you. Further, the EMI comprise only the interest component, making monthly payment easier for you. You can pay off the principal at the end of the tenor.

If you need to manage multiple debts with high interest in a more affordable and organised manner, choose to consolidate your debt with a personal loan.

The content of this document is meant merely for information purposes. The personal loan features mentioned in this article are subject to updation, completion, revision, verification and the same may change materially based on policy revisions. For more details, please visit our Personal Loan terms and conditions page here.

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