Debt Consolidation: When it Helps, When it Harms

• Debt consolidation loans can simplify finances by combining multiple EMIs into one, offering a single due date and lender.
• It genuinely helps when replacing high-interest debts (like credit cards) with a lower-interest loan, especially with stable income and no new debt.
• Consolidation can backfire if repayment tenure is stretched too long, leading to more interest paid over time, or if it encourages new spending on cleared credit lines.
• Not all consolidation loans offer significantly lower interest rates; processing fees and longer tenures can negate benefits.
• It can increase stress if the single EMI is too high, leaving no emergency buffer, or if the underlying spending issues are not addressed.

Why It Matters: Debt consolidation is a tool that helps when used strategically for financial restructuring, but harms if underlying issues persist.