Finding it Hard to Manage Multiple Personal Loan EMI Payments? Merge All into One & Repay Smoothly!

Last Updated : Dec. 27, 2019, 1:06 p.m.

At a time when there are multiple needs to fulfill, people often resort to multiple personal loans. What’s interesting is that they take loans from different lenders having different EMI dates. All that makes it puzzling and rather cumbersome for borrowers to deal with. Different dates mean you simply can’t afford any uncertainty, which is like fighting against the basic nature of life. What makes it even more challenging is the different repayment structure due to the variation in the interest rate, loan amount and tenure. Having said that, there’s a solution in the form of debt consolidation by merging all the loans into one single loan. It will greatly ensure timely repayment and make your CIBIL score tick above. Read this post to know the benefits in detail and how you can merge loans.

Benefits of Personal Loan Merger

Smooth Repayment – With the merger, you’ll have a fixed date on which you need to make the repayment. This eliminates the need to remember different dates and make constant changes to your financial routine.

Boosts Credit Score – With multiple loans and different EMI dates, chances of payment skips are all but more. If you skip payment frequently, your credit score will come down rapidly. To fix that problem, you can get the loan EMIs merged and pay the combined sum on a specific date every month. The timely payment record will help maintain a good credit score and boost your chances of credit approvals from lenders.

Helps In Making Effective Financial Plans – Since the date of repayment will be one, you can plan your finances accordingly. This will help you figure out which expenses to have and which to do away with. With that done, the timely payment will be more or less a formality.

How Will the Merger of Multiple Personal Loan EMIs into One Work Out?

Assume you are having three personal loan EMIs of different banks. Check which comes with the lowest rate of interest . Once done, talk to that particular lender about merging the loans into one. The lender will ask you to get the repayment schedule of the other two lenders accompanied by a non-objection letter (NOC). Before saying YES, the lender where you want to get the loan merged, will check the repayment track of the other two loans. Only when the repayment is found smooth will the transaction get approved. Also, you need to pay a flat fee which remains quite less in comparison to the usual personal loan processing fee.

Will it be Beneficial in Reducing the Overall Interest Outgo?

This will depend greatly on the amount of transfer, the difference in the rate of interest and the time for which you want to service the transferred balance. The illustration below will give you a fair idea of what to expect from this sort of loan arrangement.

Example – You are servicing three personal loans whose details are as follows –

First loan of INR 5 lakh at 15% interest rate for 5 years, outstanding loan balance after 2 years = INR 3,43,137 EMI payable = INR 11,895, interest paid so far = INR 1,28,616, total interest to be paid = INR 2,13,698

Second loan of INR 3 lakh at 14% interest rate for 4 years, outstanding loan balance after 1 year = INR 2,39862, EMI payable = INR 8,198, interest paid so far = INR 38,238 total interest to be paid = INR 93,501

Third loan of INR 2.50 lakh at 11% interest rate for 3 years, outstanding loan balance after 6 months = INR 2,01,314, EMI payable = INR 8,185, interest paid so far = INR 16,794, total interest to be paid = INR 44,648

If you merge the previous two loans with the third one at the lowest rate of 11%, you’ll need to pay an EMI of INR 30,022, which is slightly higher than INR 28,278 that you must have been paying earlier. The interest to be paid in two and a half years amounts to INR 1,16,346.

Now, if you add this to what you have paid already, the resultant sum comes out as INR 2,83,200, which is INR 68,647 (2,13,698+93501+44,648-283200) lower than what will be the case when you pay each of the three loans individually. Even if you add a flat balance transfer fee of INR 10,000, you could still save a handy sum of INR 58,647.