Multiple EMI Consolidation: Convert All EMIs Into One Monthly EMI

What Does Converting All EMIs Into One EMI Mean In India?

Converting all EMIs into one EMI refers to paying multiple EMIs as one single payment. Suppose an individual has a personal loan, a car loan and credit card dues; he may consider consolidating his debts by taking a consolidation loan. By doing so, he will only have to make one EMI payment to the lender instead of making separate payments to different lenders. This may ease the repayment process and lighten the monthly financial burden, depending on the tenure and rate of interest of the consolidated loan.

Understanding Consolidation & Its Work

Debt consolidation involves combining multiple outstanding debts into a single loan or repayment scheme. In other words, you would be paying off one loan instead of several creditors. You can consolidate your debts if you have to pay interest on multiple loans or if you have to pay different creditors on different dates. The main objective of consolidating debt is to make repayments easy, and in some cases, to also reduce the overall quantum of interest or make monthly repayments easier.

Here are the steps included in debt consolidation:

1. Assess your debts: Make a list of all credit cards and loans that you have to pay back. For each loan, write the amount that you have to pay back and the rate of interest applicable to it.

1. Apply for a consolidation loan: You can approach a bank or an NBFC and apply for a loan. The amount that you apply for should be enough to pay back your existing debts.

1. Repay your existing debts: Once your application for a consolidation loan has been approved, you can use the money to pay back your existing loans and credit card dues.

1. Pay one EMI: You can then pay back the consolidation loan in one EMI, according to the tenure and interest rate of the new loan.

Debt consolidation can help you pay back your loans and credit card dues easily. However, it is important to compare interest rates, processing fees, and tenure before consolidating your debts.

When Should One Consider Debt Consolidation?

Debt consolidation may be a good option if you have several loans and credit card bills due, particularly if the existing loans or credit cards have high rates of interest or varying due dates for repayments. 

Debt consolidation could be a good option to simplify your financial management and save on the amount of interest that you pay, but remember to compare and contrast the rates, charges, tenure, and repayment amount of the consolidated loans before deciding to consolidate your debts.

How Can Interest Rates Affect Your Monthly Repayment Plan?

Interest rates have a direct impact on not only your EMI but also the overall payment you make during the life of the loan. Say, for instance, you are considering consolidating your outstanding credit card dues of, say, ₹300,000 at 16% as compared to keeping them as credit card outstanding at 38%. In such a case, you might save on interest if you consolidate, but that would depend on tenure, fees, and other terms of repayment. A lower rate may mean manageable EMIs, but if the tenure is too long, it may end up costing you more in overall interest paid. Consider both factors, i.e., EMI and overall repayment, before opting for loan consolidation.

What Are The Benefits Of Converting All EMIs Into One?

Converting multiple EMIs into a single EMI may make it easier to repay your loan, but the benefits will depend on the interest rate, charges, and tenure of the new loan.

1. Potentially lower interest: A new loan may have a lower rate of interest than some of your existing debts.
2. Simpler payments: You have to make only one payment to repay your loan.
3. EMI may reduce: You may get a lower EMI by increasing the tenure of your loan, but you will end up paying more in interest.
4. Your credit profile: Timely repayments will improve your credit profile, but defaulting on payments will damage it.
5. Structured repayment: Consolidation will give you a clear schedule of your repayments, as well as a definite end date for your loan.

Consolidation can be a good option in certain situations, but it may not always be cheaper. Compare the interest rates, charges, tenure and total repayment amount before you consolidate your loans.

How Does LoanLogic Help You In Debt Consolidation?

LoanLogic can assist many Indian borrowers in evaluating and understanding various loan options for personal loans and credit cards so that they can make a better choice based on interest rates, amounts and eligibility, apart from the monthly instalment or the EMI, helping a borrower understand if they want to consolidate their loans. However, it is important for the borrower to compare the processing charges and the overall payout before opting for a debt consolidation facility, as it may not always be the best option for repayment.

Bottom Line 

While converting multiple EMIs to a single one can ease repayment obligations, it is necessary to understand that a lower monthly outflow does not always equate to a cheaper loan. The choice between multiple EMIs and a consolidated one depends on various factors like outstanding amount, rate of interest, time left to repay, and whether you can consolidate. You must compare the overall cost of both repayment methods. If consolidating can help you reduce the rate of interest and enable faster payoff without stretching your debt profile unwisely, it makes sense to consider the switch.

FAQs

Can I club all EMIs together into one EMI?

Yes, you can consolidate multiple loans or credit card bills into a single payment called an EMI (Equated Monthly Instalment); however, this depends on the eligibility criteria set by the lender.

Is one EMI payment cheaper than multiple EMIs?

A single EMI may have a lower interest rate; however, the total amount paid for a single EMI is dependent upon the interest rates and other applicable charges and the tenure of repayment. It is not always cheaper to pay a single EMI.

Will my monthly EMI get reduced by paying back multiple EMIs in one EMI?

A single EMI may have a lower interest rate and thus can reduce the monthly outflow; however, this depends on the terms and conditions provided by the lender. The repayment tenure also impacts the EMI amount and the total interest paid.

Can I club my credit card dues with my personal loan?

Yes, there are certain eligibility criteria for a personal loan; a borrower can consolidate their credit card dues into a personal loan.

How does consolidation impact my credit score?

Applying for a personal loan or any other form of consolidation can impact your credit score initially; however, it can improve your credit score if you are able to make repayments on time.

What documents are required for consolidation?

Lenders ask for documents that confirm your identity, address, income, and existing loans, among other things, and requirements may differ.

Can I consolidate loans from different lenders?

It depends on the consolidation product that you apply for and the lender’s terms and conditions; the new loan consolidates eligible debts, including loans from multiple lenders.

Does consolidation clear my existing debt?

No, it doesn’t. It replaces multiple debts with a new one, which means you now have to pay back the consolidated loan.

What should be compared before consolidation?

The interest rate, processing fees, foreclosure charges, tenure, EMI, and total repayment amount should be compared and evaluated.

Is consolidation right for me?

It depends on a particular situation, but debt consolidation may not be a good option if the cost is too high or you are tempted to take out new loans.