Personal
Business
Keeping track of several credit card balances, loans and instalments can become challenging. Different repayment amounts, interest rates and payment dates can make monthly budgeting more complicated and increase the risk of missed or late payments.
Debt consolidation may provide a more organised approach. A personal loan can potentially be used to settle multiple eligible debts, leaving you with one monthly instalment under an agreed repayment schedule.
However, debt consolidation does not eliminate your debt. It replaces multiple financial obligations with a new loan. It is therefore important to compare the total costs and make sure the new repayment is affordable before proceeding.
What Does It Mean to Consolidate Debt with a Personal Loan?
Debt consolidation involves using a personal loan to settle multiple eligible financial obligations, such as:
– Outstanding credit card balances
– Existing personal loans
– Other eligible financial commitments
Once the intended balances have been fully settled, you repay the new personal loan through one monthly instalment over an agreed period.
For example, if you are managing two credit card balances and an existing loan with different payment dates, a personal loan could potentially be used to settle these obligations. Instead of tracking three separate repayments, you would manage one monthly personal loan installment.
The eligible debts, settlement process and approved loan amount will depend on the lender’s terms and your financial profile.
Benefits of Consolidating Multiple Debts
One Monthly Repayment
Consolidating eligible debts may leave you with one repayment amount and one payment date each month. This can make your financial commitments easier to track and reduce the likelihood of overlooking a payment.
You should confirm that all the intended debts have been fully settled, as any remaining balances will still need to be paid separately.
Easier Monthly Budgeting
When repayments are deducted at different times during the month, it can be difficult to understand how much income remains available for essential expenses, savings and other spending.
A single monthly instalment can give you a clearer view of your financial commitments and make it easier to plan your monthly budget.
A Clear Repayment Schedule
Credit card debt can remain outstanding for a long time when only the minimum amount is paid each month.
A personal loan generally has an agreed monthly installment and repayment period. This gives you a clearer understanding of:
– How much you need to pay each month
– How long the repayment period will be
– The total amount you are expected to repay
This structure can make it easier to monitor your progress towards settling your debt.
Potentially Lower Borrowing Costs
Some debts, particularly revolving credit card balances, may carry higher interest rates than a personal loan.
If the personal loan has a lower interest rate and overall borrowing cost than your existing debts, consolidation could potentially reduce the total amount you pay. However, this is not guaranteed.
Before proceeding, compare:
– The interest rates applicable to your existing debts
– The interest rate applicable to the new personal loan
– Processing and insurance fees
– Early settlement charges on existing debts
– The repayment period
– The total amount payable
Remember that the lowest monthly installment does not always result in the lowest overall cost.
Reduced Dependence on Minimum Payments
Paying only the minimum amount due on a credit card may keep the account up to date, but it can extend the time required to clear the balance and increase the total borrowing cost.
Using a personal loan to fully settle eligible credit card balances may provide a more structured repayment approach, provided you avoid accumulating new balances after consolidation.
What Should You Consider Before Consolidating Your Debts?
Calculate Your Total Outstanding Debt
Prepare a list of every debt you intend to settle and record:
– The current outstanding balance
– The monthly repayment
– The applicable interest or profit rate
– The remaining repayment period
– Any early settlement charges
– Any overdue amounts or additional fees
This will help you understand the amount required and whether the personal loan can cover the intended obligations.
Compare the Total Cost
A longer repayment period may reduce the monthly instalment, but it can also increase the total amount paid over time.
Compare the cost of continuing with your existing repayment arrangements against the total amount payable under the new personal loan. Make sure that a lower monthly repayment does not result in significantly higher long-term borrowing costs.
Make Sure the Instalment Is Affordable
The new monthly instalment should fit comfortably within your budget after accounting for housing, utilities, transport, groceries and other financial commitments.
Avoid committing to an installment that leaves you with little room for unexpected expenses.
Review the Fees and Terms
Before accepting a personal loan, carefully review the Key Facts Statement and applicable terms and conditions.
Pay particular attention to:
– The interest rate
– Processing fees
– Insurance charges, where applicable
– Late payment fees
– Early settlement charges
– The repayment period
– The total amount payable
Understanding these details will help you make a more informed decision.
Confirm the Settlement Process
Check which debts are eligible for consolidation and how they will be settled. After settlement, obtain confirmation that the intended balances have been cleared.
Remember that settling a credit card balance does not necessarily close the card account. If the card remains active, manage the available limit carefully to avoid building up new debt.
When May Debt Consolidation Not Be the Right Option?
Using a personal loan to consolidate multiple debts may not be suitable if:
– The new loan has a higher total cost than your existing debts
– Processing fees and early settlement charges outweigh the potential savings
– The lower monthly instalment is achieved through a significantly longer repayment period
– Your income is unstable or may not support the new instalment
– You intend to continue borrowing without changing your spending habits
– You are already struggling to meet essential living expenses
If you are experiencing difficulty making your current repayments, contact your lenders as early as possible to discuss any available support or restructuring options.
Tips for Staying on Track After Consolidating Your Debts
If you decide to consolidate your debts, the following steps can help you manage the new repayment plan:
– Confirm that all intended debts have been fully settled
– Keep settlement confirmations and account statements
– Set up automatic payments or monthly reminders
– Make every personal loan repayment on time
– Review your budget regularly
– Avoid taking on unnecessary new debt
– Build an emergency fund where possible
Debt consolidation is most effective when it is supported by regular repayments and responsible spending habits.
Consolidating Debts with a Deem Personal Loan
A Deem Personal Loan may provide eligible customers with a structured way to manage multiple financial commitments through one monthly installment.
Key benefits include:
– No salary transfer required
– Repayment periods of 12, 24, 36 or 48 months
– One structured monthly repayment for eligible consolidated debts
The approved loan amount, interest rate, repayment period and applicable terms will depend on your eligibility, financial profile and Deem’s credit assessment.
Before applying, calculate your existing obligations and compare the total cost of the personal loan with your current repayment arrangements. You should also confirm which debts are eligible for settlement.
A More Organised Approach to Repayment
Consolidating eligible debts through a personal loan can simplify multiple payment dates and instalments into one structured repayment plan. It may provide better visibility over your monthly commitments, a clearer repayment period and the potential to reduce your overall borrowing costs.
However, the decision should be based on more than the monthly instalment. Compare the total amount payable, review all applicable fees and terms and make sure the repayment fits comfortably within your budget.
Frequently Asked Questions
A personal loan may be used to settle eligible credit card balances, personal loans and other financial obligations, subject to the lender’s terms and approval criteria. Confirm which debts are eligible before applying.
It may reduce your combined monthly repayment, depending on the approved amount, interest rate and repayment period. However, a lower instalment achieved through a longer repayment period could result in a higher total amount payable.
No. Debt consolidation does not remove your debt. It replaces or restructures eligible obligations under a new repayment plan. Any financial benefit will depend on the new loan’s interest rate, applicable fees, repayment period and total amount payable.
Settling a credit card balance does not necessarily close the card account. If the account remains active, manage the available limit carefully to avoid accumulating new debt.
Debt consolidation does not automatically improve your credit score. Your credit profile may be influenced by several factors, including your total financial obligations, credit applications and repayment behaviour. Consistently making repayments on time can demonstrate responsible financial management.
Compare the interest rates, fees, monthly instalments, repayment periods and total amounts payable under the new loan and your existing debts. The new arrangement should make your repayments more manageable without significantly increasing your overall borrowing cost.
© All rights reserved 2026 Deem Finance LLC. Deem Finance LLC (Deem) is regulated by Central Bank of the UAE.