New year, one EMI: How to consolidate debt using a personal loan in 2026

As the New Year approaches, many borrowers are considering personal loans as a way to consolidate their existing debt. The idea is simple: reduce financial stress and bring repayments under better control. Currently, personal loan interest rates typically range from 9% to 24%.

This makes debt consolidation a sensible option for those struggling to manage multiple repayments, especially when compared with high-cost unsecured debt such as credit card cash withdrawals, buy-now-pay-later plans with added fees, and payday loans.

Kundan Shahi, founder of Zavo, says, “Taking a personal loan for debt consolidation can simplify finances by turning multiple repayments into one manageable EMI and easing short-term stress. It can improve cash flow and bring structure. But it is not a cure-all. Without better spending habits and discipline, borrowers risk slipping back into debt and defaulting again.”

Why will debt consolidation matter in 2026

• Simplifies repayments: Borrowers repay one fixed EMI every month, instead of dealing with multiple due dates and interest charges. Furthermore, this simplification makes repayment easier and properly manageable.
• Potential savings on interest expenses: If the applicable interest rate is lower than the existing debt, it can significantly bring down your total interest costs. Proper planning and calculation, with the help of a certified financial planner in this regard, can help in making a well-informed decision.
• Boosts credit behaviour: Timely repayments of a single consolidated loan may help strengthen credit profiles, improve credit scores and boost the borrower's confidence over time.

Step‑by‑step guide to consolidate

1. Assess your total outstanding debt: Write down and list all your current pending debt obligations, such as credit cards, personal loan EMIs, home loan EMIs, if any, and total the outstanding amounts.
2. Check eligibility before applying: Most lending institutions look at the borrower's income, job stability and credit scores, preferably of over 750+ improves approval chances.
3. Compare interest rates and associated charges:To accomplish this task, you can use online EMI calculators to compare monthly payments on various loan products and total interest outgo. To help you make the best possible personal loan borrowing decision.
4. Apply and pay off existing debts:Once approved, use the new loan to close old accounts and focus on a single repayment schedule. Ensure that you never miss any due dates. So that you can maintain a clean credit profile and a solid credit score.
5. Repay responsibly: To make sure that all your repayments are made on time without any delay, you should set up auto debits to avoid missed payments and penalties.

What should you watch out for

A few risks to watch out for before taking a personal loan are:

• Processing fees and hidden charges can bring down savings if not taken into consideration.
• Long repayment tenures may result in higher total interest payments, despite lower EMIs.
• Furthermore, defaulting on the consolidated loan can damage credit scores and trigger legal consequences under the Indian legal system.

In conclusion, when a borrower plans well and consolidates a personal loan, it can be a reasonable first step towards achieving financial betterment. Still, it is vital to understand both a personal loan and its consolidation on a conceptual level, along with carefully weighing its pros and cons to commit to repayments in a disciplined manner.

Disclaimer: MintMoney has a tie-up with fintechs for providing credit. You will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards, and credit scores. MintMoney does not promote or encourage taking credit, as it comes with a set of risks, such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.