Banking
What is a Debt Consolidation Loan and How Does it Work?
Debt consolidation is the act of clubbing all your existing loans together and paying them off as one single debt.
The biggest advantage of taking a debt consolidation loan is that you don’t have to worry about connecting with multiple vendors for repayments. There’s no need for managing multiple credit cards and the EMIs you pay are dedicated towards a single big loan.
There are some cases where you cannot apply debt consolidation. For example, you cannot take a debt consolidation loan for paying off pending EMIs for liable or secured assets (such as a home loan).
However, for unsecured loans like personal loans, education loans, and credit card dues, you can apply for a debt consolidation loan to clear them up.
Some organisations these days offer secured debt consolidation loans for individuals where they put up their property or business assets as the collateral.
Unsecured debt consolidation loans are hard to apply for and charge higher rates of interest. Most banks aren’t willing to give out individuals unsecured debt consolidation loans but there are NBFCs, fintech startups, and private organisations that disburse these loans as long as the borrower’s profile is verified and they demonstrate sufficient creditworthiness.
The best part about these loans is that the interest rates remain fixed and do not fluctuate. This means your monthly EMI repayments stay the same and don’t suddenly change, thus giving borrowers peace of mind.
Advantages of Debt Consolidation Loans
There are various reasons why you’d want to opt for a debt consolidation loan. Here’s a list of the benefits:
- One Single Liability – It’s hard enough to keep track of multiple EMIs and repayment. Going for debt consolidation takes care of this legwork since your lender takes care of the communications. Your only duty is to make sure you make your EMI payments on time for the debt consolidation loan you applied for.
- Lower Interest Rates – With multiple different loans, you have varying interest rates. But with a debt consolidation loan, you have to worry about a single interest rate. The payoff is lower too and it makes the monthly repayments lesser too.
- Paperless Process – If you’re applying for a debt consolidation loan online, you’ll find that the entire process is paperless. You can file your application digitally and you’ll find that lenders disburse the amount in just a few days if you meet their borrower requirements.
- Flexible EMI Tenure – Debt consolidation loans can have a flexible repayment tenure of anywhere between 2 years to 20 years. Self-employed individuals can get a tenure of up to 18 years while salaried individuals are liable for more.
Debt Consolidation Loans vs Debt Settlement
The key point to remember about debt consolidation loans is that they don’t completely erase all your debts. They simply club your loans together and transfer them to a single lender. As a borrower, you become responsible for making repayments to a single lender.
Debt settlement works a bit differently and aims in providing credit relief to borrowers. Here, negotiations are done with lenders to reduce the loan amount or interest rates instead of cutting down on the number of lenders by transferring the debt to an organisation.
There are many credit counselling services and organisations that help in doing debt negotiations with organisations and providing relief to borrowers, although they don’t directly give out any loans on their own.
How Does It Work?
Let’s say you’ve taken a loan of Rs 1 lac over a period of 2 years with an interest rate of 12%. And you have another loan of Rs 2 lacs which you have to clear within a year, its annual interest rate being 10%. The monthly EMI payments for each of these loans may come to around INR 5170 and INR 5830 respectively.
With a debt consolidation loan, your monthly EMI payment would amount to INR 6000 combined. However, the trade-off is that you get a longer tenure for making both the repayments on your existing debts. Instead of making multiple payments to lenders, you can now make a single EMI payment every month and end up saving money on interest. The longer tenure also gives you peace of mind as you know that you can handle your repayments a lot better. Debt consolidation gives you a favourable structure for making repayments and makes it convenient to pay off multiple small loans together by applying for a big loan.
Make sure you identify all your financial obligations and liabilities before going for this type of loan. It’s always a good idea to talk to an advisor before applying for debt consolidation if you’re not sure whether or not to go for one based on your financial circumstances.
What Are The Eligibility Requirements?
If it’s your first time applying for a debt consolidation loan, you’re going to have to make sure your KYC documents are with you. Lenders look for documents such as:
- Proof of employment and stable income (at least 2 months’)
- Letters from credit agencies
- Bank statements
- Proof of Identity
You must also be a resident of India and be 25 years of age or older. If you’ve been self-employed for years and have taken loans before the age of 23, you can still go ahead and apply for a debt consolidation loan before this age limit criteria. Your lending organisation will decide which creditors you pay off after your debt consolidation loan is approved. The way this works is you pay off your highest-interest loans first and clear up the remaining ones over time.
However, some organisations may allow you to pay lower-interest loans in the beginning and later clear the higher-interest ones. This will depend on your lender whom you’re applying for a debt consolidation loan through or the lending organisation. Additionally, you will have to demonstrate your creditworthiness and show your CIBIL Score when applying for these types of loans.
How Does A Debt Consolidation Loan Affect Your CIBIL Score?
If you take a debt consolidation loan and pay off the principal portion of your loan sooner, it can attract various credit lending organisations to your profile. The sooner you clear out the existing loans, the higher your CIBIL rating will be.
Also, the period involved in making all your repayments becomes shorter since you’re clubbing different debts into a single EMI. Overall, it makes it much easier to manage your existing debt repayments. You can also get a much more reasonable interest rate when you go for debt consolidation and sometimes, you can cut that number to one-thirds depending on what your current CIBIL rating is like.
By Aduragbemi Omiyale
A collaboration to enable fast money transfers into Nigeria has been entered into between Flutterwave and Xoom, PayPal’s international digital money transfer service.
The partnership allows Xoom transfers to be converted by Flutterwave and settled locally in Naira, enabling quick transfers directly into recipients’ bank accounts at Access Bank, UBA, Zenith Bank, First Bank, GTBank, and additional participating banks across Nigeria.
The deal also enables Xoom’s global network with Flutterwave’s local payout infrastructure, allowing users globally to send funds directly into Nigerian bank accounts with improved speed and efficiency.
Nigeria is the leading remittance recipient in Sub-Saharan Africa, receiving over $20 billion in personal remittances in 2024. Despite this volume, receiving international payments has historically remained complex due to FX constraints and settlement delays. This collaboration helps address those challenges in a market of more than 232 million people, where the ICT sector is projected to contribute 21 per cent of GDP by 2027.
By combining Xoom’s expansive reach with Flutterwave’s local compliance and banking partnerships, the two companies are providing a more accessible financial corridor for the continent.
Xoom, a PayPal service, is a fast and secure international digital money transfer service that enables consumers to send money, pay bills, and reload phones for friends and family in approximately 160 markets globally.
As part of PayPal’s global payments ecosystem, Xoom leverages advanced fraud protection, compliance capabilities, and a trusted global network to help millions of customers move money quickly and securely across borders.
“We’re excited to have been chosen by Xoom for their Nigeria expansion. Millions of Nigerians rely on money from abroad to support everyday needs, whether it’s families receiving help from loved ones, freelancers getting paid for their work, or individuals earning income from the global economy. This helps make it easy and more reliable for people in Nigeria to receive funds and stay connected to opportunities beyond borders,” the chief executive of Flutterwave, Mr Olugbenga GB Agboola, stated.
By Aduragbemi Omiyale
An initiative known as Nigeria Lightning Rounds, designed to expand funding opportunities for Nigerian startups and small businesses by connecting founders with local and international investors, has been launched by ProvidusUnity Bank, in partnership with US-based global venture firm and accelerator, gener8tor.
Scheduled to be held on July 15, 2026, Nigeria Lightning Rounds will feature carefully selected startups engaging with targeted investors who have expressed interest in supporting Nigerian innovation.
Participating founders will have the opportunity to pitch their businesses through focused 15-minute virtual sessions facilitated by gener8tor and ProvidusUnity Bank’s networks.
The program will focus on high-growth sectors including fintech, healthtech, manufacturing, sustainability, and AI, but welcomes SMEs from all industries, with intending participants urged to apply via https://www.gener8tor.com/lightning-rounds/nigeria.
“We recognise that access to capital remains one of the biggest challenges facing entrepreneurs in Nigeria. Through our partnership with gener8tor, we are creating a platform that connects promising Nigerian founders with investors who can provide the support required to scale their businesses,” the Head of Business Development at ProvidusUnity Bank, Mr Ernest Elue, stated.
“The partnership reinforces ProvidusUnity Bank’s commitment to strengthening Nigeria’s entrepreneurial ecosystem by supporting innovation, enabling access to opportunities, and creating pathways for businesses with high-growth potential,” he added.
Also commenting, the Director of Lightning Rounds at gener8tor, Ms Elizabeth Larios, said, “gener8tor is thrilled to partner with ProvidusUnity Bank to extend the Lightning Rounds model into Nigeria.
“This collaboration reflects our commitment to building equitable ecosystems and driving capital to the most promising and underrepresented entrepreneurs.”
Lightning Rounds are a signature initiative of gener8tor’s investment platform, which has facilitated thousands of investor-startup meetings globally. The format is optimised to eliminate friction, reduce bias in early-stage fundraising, and help founders secure capital from investors aligned with their mission and stage. gener8tor’s previous Lightning Rounds for Nigerian Founders in 2025 featured 18 participating Investors and led to 50 investment meetings facilitated.
By Modupe Gbadeyanka
The verification of the depositors of the 46 microfinance banks, whose operating licenses were revoked by the Central Bank of Nigeria (CBN) over a week ago, has commenced.
The exercise, aimed at refunding those whose funds were trapped in the small lenders, is being conducted by the Nigeria Deposit Insurance Corporation (NDIC).
In a statement on Thursday, the agency said its staff members have been positioned at the offices of the affected banks across the country to attend to depositors.
It was disclosed that depositors of the defunct banks, who had their Bank Verification Numbers (BVNs) linked to their accounts in the failed banks, will be paid through their alternative accounts in existing banks.
However, depositors whose BVNs were not linked to their accounts in the failed banks have been encouraged to visit the affected banks’ offices with proof of account ownership, a passport photograph, verifiable means of identification (Driver’s Licence, Permanent Voter’s Card, International Passport or National ID Card) and BVN.
NDIC also stated that depositors can alternatively file their claims online through its website: www.ndic.gov.ng, to complete the Pre-Verification Claims Form by clicking on the Search Bar, and typing Pre-Verification Claims Form; opening the Form and filling in their details. They can also do so by clicking the link: https://ndic.gov.ng/ndic-pre-verification-claims-form/ or by visiting any of the NDIC offices closest to them to file their claims.
For further enquiries, the corporation can be reached on any of the following lines: 09037273810, 09038197064, 08104220807, 09064657140.
