How to Combine Several Loans into One and When It Is Beneficial

Managing several loans at the same time can become difficult. A borrower may have a consumer loan in one bank, a credit line in another, and a mortgage or secured loan elsewhere. Each obligation may have a different interest rate, payment date, repayment term, and service fee. As a result, keeping track of several monthly payments can be inconvenient and may increase the risk of delays.

Loan consolidation allows borrowers to transfer existing debts from other banks or credit organizations to one bank and replace several monthly payments with a single loan. Depending on the offer, the new bank may provide a lower interest rate, a longer repayment term, a reduced monthly payment, or an additional amount of financing. Some Armenian banks offer consolidation only for unsecured consumer loans, while others also refinance mortgages, car loans, credit lines, and loans secured by real estate or other property.

However, combining loans does not automatically mean that borrowing becomes cheaper. A lower monthly payment may result from a longer repayment period, which can increase the total amount of interest paid. Borrowers should compare the annual percentage rate, total repayment amount, fees, collateral requirements, insurance costs, and early repayment conditions before accepting a new offer.

This article reviews the current loan consolidation and refinancing offers by Armenian banks. It explains which types of loans can be combined, the available amounts and repayment terms, the applicable rates and fees, and the main conditions borrowers should consider when choosing an offer.

What Is Loan Consolidation and How Does it Work?

Loan consolidation is the process of replacing several existing loans with one new loan. Instead of making separate payments to different banks or credit organizations, the borrower transfers the outstanding debts to one bank and makes a single monthly payment under the new agreement.

In Armenia, banks often use the term loan refinancing rather than loan consolidation. Refinancing generally means taking a new loan to repay an existing loan from another financial institution. It may involve transferring only one loan, such as a mortgage or car loan, or combining several consumer loans, credit lines, and other obligations into one.

Therefore, loan consolidation can be considered a type of refinancing. However, not every refinancing offer allows several loans to be combined. Some products are designed only for transferring one specific loan, while others explicitly allow borrowers to refinance multiple obligations from different banks.

The new loan may have a different interest rate, repayment term, monthly payment, or collateral requirement. In some cases, the bank may also provide an additional amount beyond what is needed to repay the existing debts. Whether consolidation is beneficial depends on the full cost of the new loan and not only on the size of the new monthly payment.

Why Do Borrowers Combine Their Loans?

Borrowers usually combine their loans to simplify repayment and improve the conditions of their existing debt. Managing several loans at the same time may involve different payment dates, interest rates, service fees, and repayment terms. By replacing these obligations with one new loan, the borrower can make a single monthly payment to one bank.

Another common reason is to reduce borrowing costs. If the new loan has a lower interest rate or APR than the existing loans, the borrower may pay less interest over the repayment period. Consolidation can be especially useful when several expensive consumer loans, credit lines, or credit card balances are replaced with one loan at more favorable conditions.

Some borrowers use consolidation to reduce their monthly payment. This may be achieved through a lower interest rate, a longer repayment term, or both. A smaller monthly payment can make the debt easier to manage, although extending the term may increase the total amount repaid.

Banks may also offer an additional amount of financing after repaying the existing debts. This allows the borrower to receive extra funds without taking out a separate loan. In secured refinancing, borrowers may also seek better collateral conditions, a longer term, or the replacement of an existing secured loan with a more convenient product.

However, the main purpose of consolidation is not always to save money. For some borrowers, the greatest benefit is convenience, better control over monthly obligations, and a lower risk of missing payments.

When Is Loan Consolidation Worth It?

Loan consolidation may be worthwhile when replacing several existing loans with one new loan improves the borrower’s overall financial position. The main benefit may be a lower interest rate, a smaller monthly payment, lower fees, a more manageable repayment term, or the convenience of making one payment instead of several.

Consolidation can be especially beneficial when high-cost consumer loans, credit lines, or credit card balances are replaced with one loan at more favorable conditions. If the new loan has a lower annual percentage rate, or APR, the borrower can reduce the total cost of the debt.

A lower monthly payment also makes existing obligations easier to manage. However, borrowers should check how the reduction is achieved. If the payment becomes smaller only because the repayment term is extended considerably, the total amount of interest paid may increase.

Before accepting an offer, the borrower should compare the total remaining cost of the existing loans with the total cost of the new consolidated loan. The calculation should include interest, service charges, insurance, property valuation, notary fees, collateral registration expenses, and any other mandatory costs.

Loan consolidation is generally worth considering when the financial savings and practical benefits are greater than the costs of transferring and closing the existing loans.

When is Loan Consolidation Not Worth It?

Loan consolidation may not be worthwhile when the new loan does not reduce the total cost of the borrower’s debt. A lower advertised interest rate or smaller monthly payment does not always mean that the new offer is more favorable.

One common risk is extending the repayment term. A longer term can reduce the monthly payment, but it may also cause the borrower to pay interest for many additional months or years. As a result, the total repayment amount may be higher than the remaining cost of the existing loans.

Consolidation may also be less beneficial when the existing loans are close to being fully repaid. In many loans, a significant part of the interest is paid during the earlier stages of repayment. Replacing such loans with a new long-term obligation may restart the repayment process and increase the overall cost.

Additional expenses can also reduce or eliminate the expected savings. These may include application and service fees, insurance premiums, property valuation costs, notary fees, collateral registration expenses, and other mandatory payments. Borrowers should also check whether their existing agreements include any costs related to early repayment or closing the loans.

Using property as collateral may create another disadvantage. Combining unsecured loans into a loan secured by real estate may provide a lower rate or larger amount, but it also places the borrower’s property at risk if repayments cannot be made.

Loan consolidation may therefore not be worth it when the new APR is not significantly lower, the repayment term becomes much longer, the transfer costs are high, or the new loan introduces collateral and other obligations that outweigh its benefits.

Loan Combination Offers in Armenia

At AFM, we reviewed and gathered loan consolidation offers published by Armenian banks. The offers listed below are those in which the banks explicitly state that several loans can be combined into one.

Many Armenian banks also provide general loan refinancing products that may allow borrowers to consolidate several obligations. However, this is not always clearly stated in the published conditions and should be confirmed directly with the bank.

For more information about loan refinancing and current bank offers in Armenia, read our other article, “How to Transfer Your Loan to Another Bank to Reduce the Interest Rate or Increase the Loan Amount.”

AMIO Bank

1. Description: unsecured consumer loans from other banks.
2. Amount: AMD 100,000 - 15 million
3. Term: up to 60 months
4. APR: from 13.9% nominal
5. Fees and application: No application, disbursement or monthly service fee. Application through a branch. An additional amount may be available after assessment.

AMIO Bank

1. Description: Consumer loans from other banks secured by real estate.
2. Amount: Up to AMD 100 million
3. Term: Up to 10 years
4. APR: from 13.5% nominal
5. Fees and application: The property must be pledged to AMIO Bank. Additional financing may be available after the borrower and collateral are assessed.

AMIO Bank

1. Description: Mortgage loans from other banks for purchasing or renovating real estate.
2. Amount: From AMD 1 million, generally up to the outstanding balance of the mortgage
3. Term: Up to 240 months
4. APR: from 12.5% nominal
5. Fees and application: No one-time disbursement or monthly service fee. AMIO Bank may cover specified notary, cadastral and pledge-registration expenses. An additional credit line may also be available.

IDBank

1. Description: One or several loans secured by movable or immovable property.
2. Amount: AMD 2.5 million - 125 million
3. Term: 36 - 180 months
4. APR: From 16.6%
5. Fees and application: The interest rate may be reduced by up to 2 percentage points compared with the existing loan, but not below 15.5%. Additional financing of up to 30% may be available.

InecoBank

1. Description: Consumer loans from Armenian banks and credit organizations. Loans can be transferred and combined online.
2. Amount: AMD 100,000 - 18 million
3. Term: up to 60 months
4. APR: 14.97% - 23.13%
5. Fees and application: No one-time disbursement fee. Available through InecoMobile and sprintonline.

ARARATBANK

1. Description: Consumer loans and credit lines from other financial organizations.
2. Amount: AMD 500,000 to 5 million
3. Term: up to 60 months
4. APR: 18.40%
5. Fees and application: No loan-package or service fee. Up to 1 million in additional funds may be provided within the 5 million total limit.

UniBank

1. Description: Loans from other banks and credit organizations can be refinanced using gold as collateral.
2. Amount: AMD 50,000 - 5 million
3. Term: Up to 48 months
4. APR: 16.04% - 16.94%
5. Fees and application: No disbursement fee. Gold items must be pledged to UniBank.

VTB Bank Armenia

1. Description: Unsecured consumer loans, credit lines, installment loans and car loans. Its consolidation page explicitly says several loan payments can be combined.
2. Amount: From AMD 100,000, maximum generally up to 15 times the borrower’s net salary
3. Term: 6 - 60 months
4. APR: 17.01% - 22.12%
5. Fees and application: No application or disbursement fee; monthly service fee of 0.08%

Conclusion

Loan consolidation can help borrowers simplify several obligations by replacing them with one new loan and one monthly payment. Depending on the offer, it may also provide a lower interest rate, a reduced monthly payment, a longer repayment term, or access to additional financing.

However, combining loans is not automatically cheaper. A smaller monthly payment may result from a longer repayment period, while collateral requirements, insurance, service charges, property valuation, notary fees, and registration costs can increase the total cost of the new loan.

Before applying, borrowers should compare the APR, total repayment amount, remaining term of their existing loans, additional expenses, and any collateral requirements. They should also confirm directly with the bank which types of loans can be combined, since some refinancing products may allow consolidation even when this is not clearly stated in the published conditions.