Top 5 NBFCs for Debt Consolidation Loans in India

What Is a Debt Consolidation Loan?

A debt consolidation loan refers to a new loan taken by you to clear multiple old loans. Rather than worrying about multiple dues, interest rates, and repayment deadlines, you have to manage just one monthly payment against the new loan. Moreover, this will also help you lower your total interest burden if the interest rate for the new loan is less than that of your old debts.

How does this work?

• Write down your debts: Total up all your credit card dues, small loans, etc.
• Take a new loan: Take out a loan that is enough to clear out your old debts.
• Repay old debts: Use the money from your new loan to repay your old debts.
• Make one EMI per month: Then, just pay one EMI per month against the new loan till it is completely repaid.

Which Are the Top 5 NBFCs for Debt Consolidation Loans in India? 

1. Bajaj Finance: Suitable for Higher Consolidation Requirements

Personal loans provided by Bajaj Finance are some of the options that can be considered when borrowers want to consolidate their debt, depending on the terms of the loan.

The current personal loan offer of Bajaj Finance includes a loan amount between ₹40,000 and ₹55,00,000, with an interest rate of 10% to 30.5% p.a., and a tenure period of 12 to 108 months. The processing fee may reach 4.13% of the loan amount, including taxes.

Why Consider Bajaj Finance for Debt Consolidation?

A greater amount of loan would suit those borrowers who have to consolidate larger loans, while a longer repayment period can reduce EMI but increases the amount of interest payable. Compare your repayment cost with the applicable charges to make a better decision.

Suited for: Borrowers who need a relatively higher loan amount.

2. Tata Capital: Suitable for Borrowers Comparing Repayment Flexibility

Personal loans offered by Tata Capital start from an interest rate of 10.99% p.a., wherein the loan amount would be up to ₹35,00,000. The bank says that a CIBIL score of 750 or more could qualify the applicant, provided that the applicant meets the rest of the eligibility criteria.

Why Choose Tata Capital for Debt Consolidation?

Tata Capital is flexible on tenures and partial prepayment; thus, it is worth considering for debt consolidation purposes. A borrower needs to analyse the interest rates sanctioned and the repayment cost involved.

Most Suitable For:Borrowers who wish to compare various methods of repayment and loan structuring for consolidation purposes.

3. Aditya Birla Capital: Suitable for Larger Loan Requirements

Aditya Birla Capital provides personal loans up to ₹50,00,000. Aditya Birla Capital’s personal loan details indicate that the indicative interest rate starts from 10.99% per annum, with tenures of 84 months, as shown by the personal loan calculator provided by the lending organisation.

Aditya Birla Capital mentions processing fees that are up to 0.5% to 2.5% of loan amount. Other charges that are published include part-prepayment and foreclosure charges that may differ depending on the timing of the payment and loan terms.

Why Choose Aditya Birla Capital for Debt Consolidation?

Aditya Birla Capital provides debt consolidation loans and even offers greater loan limits to consolidate substantial debts. It is essential to take only those loans that you can repay based on your repayment capacity.

Recommended for: Individuals who have considerable debt.

4. InCred: Suitable for Salaried and Self-Employed Borrowers

InCred Financial Services provides personal loans to salaried and self-employed persons. The page currently available on its website provides the loan amount up to ₹15,00,000 and a tenure ranging from 1 to 5 years.

According to the lender, applicants have to be 21 to 60 years old with a minimum monthly income of ₹15,000. The APR of the personal loan offered by it ranges from 14% to 48%.

Why Choose InCred for Debt Consolidation?

InCred provides personal unsecured loans for debt consolidation for both salaried and self-employed customers digitally. Personalised offers should be compared as interest rates differ.

Who is best for InCred?: Salaried and self-employed applicants seeking a digital loan application process and consolidation of up to ₹15,00,000.

5. Finnable: Suitable for Digital Debt Consolidation

Finnable provides personal loans that can be used for debt consolidation. As of now, the interest rate on their personal loans ranges between 16% and 30.99% p.a., loan tenure ranges between 6 months and 60 months, and processing charges are 5% + GST.

Finnable mentions that they provide personal loans up to ₹10,00,000, and applicants who are salaried employees can apply to them according to their eligibility. They also mention debt consolidation in the list of purposes of personal loans.

Why Should Finnable Be Used for Debt Consolidation?

Finnable may be worth considering for borrowers looking for a digital application process, subject to eligibility and applicable terms.

Suitable for: Borrowers who receive a salary and want to borrow money digitally.

Top 5 NBFCs for Debt Consolidation Loans in India: Quick Overview

The table below provides a quick comparison of the five NBFCs, including their loan amounts, interest rates, tenures, and suitability for different borrowing needs.

The right NBFC ultimately depends on your personalised interest rate, eligible loan amount, repayment capacity, tenure, and the total cost of borrowing, rather than simply the lowest advertised rate.

Disclaimer: Interest rates, loan amounts, fees, eligibility criteria and other terms may change. Verify the latest terms with the respective lender before applying. 

How Should You Compare NBFCs Before Taking a Debt Consolidation Loan?

Rate comparison in the case of NBFCs goes beyond just looking at the quoted interest rate. Some of the points to consider include:

• Interest Rate: Comparison of the personalised rate quoted based on your credit history, earnings, liabilities, amount of loan, and loan tenure.
• Total Cost of Loan: Calculation of the principal, interest amount, processing charge, tax, and charges associated with foreclosing or prepayment of any other loan.
• Affordable EMI: It should be an amount that can fit into your budget. A lower EMI means a higher interest amount due to an increased tenure.
• Prepayment Charges: Look into any charges for early loan repayment and foreclosure.

A careful comparison of rates, repayment terms, and all applicable charges can help you choose a loan that genuinely reduces your debt burden. 

Is a Debt Consolidation Loan From an NBFC Actually Worth It?

A consolidation loan works best when it genuinely reduces costs and simplifies repayments.

Compare total costs carefully to determine whether consolidation truly benefits you.

Conclusion

There is a potential advantage in simplifying multiple payments through debt consolidation. However, the advantages of debt consolidation rely upon the factors of interest rate, tenure, costs, and ability to pay back. Comparing NBFCs with respect to these factors would help in selecting the loan that truly helps in fulfiling the financial objective. 

LoanLogic can help eligible borrowers explore debt-consolidation loan options from its lending partners. Final approval, interest rate, loan amount and repayment terms are determined by the respective lender.

FAQs

1. Can debt consolidation affect your credit score in India?

A hard enquiry can be triggered by the application process for a loan, which might affect your credit score temporarily. However, regular payments of the consolidation loan can contribute towards more responsible credit behaviour.

2. Can credit card limits be reinstated after consolidating credit card debt?

The payoff of a credit card will make the limit utilised available once again, according to the terms of the credit card issuer. However, the borrower must avoid the use of the reinstated limit for further borrowing.

3. Is it possible to consolidate debts from different financial institutions into one loan?

It is possible that the loan for consolidation purposes be applied to repay some other debts with different lenders. Still, the lender could set specific requirements concerning which loans are eligible for consolidation.

4. Is it wise to close your credit card accounts after consolidating the debts in them?

It is not mandatory to close your credit card accounts after you have repaid the debts, especially if the credit card does not have any costs and it is properly handled. If you have an account open, it will help to maintain its credit record, but holding credit that is unused will not make you borrow again.

5. Will there be any consequences if your loan is less than your overall debt?

You might have to repay the debt in other ways; hence, you will still be managing more than one debt. You will know the financing gap before you start the process of consolidation.

6. Can I include my past-due payments in a debt consolidation loan?

The inclusion of past-due payments will depend on the terms and conditions set by the lender. The borrowers should give true information regarding the overdue payments.

7. Can debts of varying lengths be consolidated?

Yes, debts that have varying lengths left in their repayment periods can be consolidated through the creation of a new debt. The key point to take note of here is whether the new debt will be costlier than the old ones combined.

8. What are the documents required for debt consolidation?

Identification and proof of address, bank statements, salary slips, and loan details may be asked for. The required documents may differ depending on the nature of employment and the profile of the borrower.

9. Is it possible for people running their own business to consolidate both their business and personal debts?

A financial institution might be able to differentiate between the two types of debt when deciding on whether to consolidate. The person needs to confirm if the new loan allows for debts that arise from the business.

10. What is the way to determine whether debt consolidation will save money?

Compare the amount that needs to be paid back with the new loan versus the remaining balance on the old debts. Debt consolidation is important only when it leads to actual savings.