A Personal Loan can be a valuable resource for any expenses, from emergencies to debt consolidation. However, you may find yourself stuck in multiple financial obligations if you opt for multiple loans. The good news is that you can keep your debt from spinning out of control with good money management skills. Let's look at the 6 tips to manage multiple loans and things to consider before dealing with multiple loans. Keep reading!
6 Tips to Manage Multiple Loans Like a Pro

Below are the 6 tips for managing multiple loans:
1. Maintain a Balance
First, you must
ensure that all your EMIs are at a level that will not jeopardise
your other financial obligations. The thumb rule is to not allot
more than 40% of your disposable income to your EMIs. Yet,
maintaining balance is of the essence here.
2. Make Timely Repayments
Whether you
default on a single loan or a series of loans, the immediate
consequences are usually the same: your credit
score will drop. So, if you have multiple loans, try to pay off
all of your EMIs on schedule. Defaults on personal loans can have a
significant impact on your credit score, lowering it by nearly 50
points at a time.
3. Opt for Debt Consolidation
Obtaining
a debt consolidation loan and consolidating all debts into a
single can be an ideal strategy to eliminate debt from different
sources. However, a debt consolidation loan is not offered by every
lender, and you must have an excellent repayment history and a high
credit score to qualify for such a loan.
4. Pre-close One Loan at a Time
Pre-closing loans can help reduce the clutter. The number of loans
you have will determine how easily you can accomplish this. If you
just have two, you may be able to close one of your loan accounts in
a few months, but if you have three or more, there may be too many
loans to pre-close. While you focus on pre-closing, ensure that you
pre-close the loan account with the highest interest rate first and
prioritise your loan accounts over your credit card accounts.
5. Keep a Close Eye on Your Expenses
It is best to watch where and how much you are spending so you can
set aside the amount needed to pay off your debts. Start by making
a list of your expenses and categorising them as essential and
non-essential. House rent, utility bills, education fees, and so on
are all considered essential expenses or “needs”. Shopping for
clothes, on the other hand, is a “want.” Try to meet your top-priority
expenses first and avoid low-priority expenses. Not only can you save
a lot of money this way, but you can also pay off your loans sooner.
6. Avoid Additional Credit Card Debt
If you continue to add to your credit card debt despite having
multiple loan accounts, you're only adding to your financial burden.
Credit card interest rates are typically around 35-40% p.a. As your
credit card debt grows, you will be forced to make greater minimum
payments, leaving you with very little cash in your pocket for the month.
Also Read: Decoding Personal Loan Cancellations
6 Things to Consider Before Juggling Multiple Personal Loans
Here are the things you must consider:
1. Check Your Repayment Capacity
It's
essential for you to evaluate your repayment capacity before opting
for multiple Personal Loan. Check whether you can manage the
repayment of multiple loans with your monthly income and still save
enough for your monthly expenses. Lenders will find you less
creditworthy if more than half of your income is directed towards
paying EMIs since that enhances the risk of default. Less than 40% of
your income should ideally be used to pay off a debt of any kind.
2. Apply for Pre-closure
If your
lender doesn’t levy a prepayment penalty, you should aim for the
pre-closure of a Personal Loan. Depending on the number of loans you
have, try to pay off at least one or two loans early. If you find it
difficult to retire multiple debts, at least pre-close the loan with
the highest interest rate. The financial savings made due to the
early closure of this debt can then be directed towards paying off
the other loans.
3. Keep an Eye on DTI
Debt-to-income
ratio (DTI) is a very important parameter when it comes to availing
of loans. A high DTI suggests that most of the income earned is
directed towards servicing active debts. Conversely, a low DTI
reflects smaller debt payments in comparison to income. Banks and
NBFCs pay a lot of attention to DTI when it comes to sanctioning
loans. Thus, you need to make sure that your DTI is low, especially
when you plan to avail of multiple personal loans. Also, multiple
loans can increase your DTI, which could result in higher interest
rates on consecutive loans.
4. Provide Additional Documents
Some
lenders may ask you for additional documentation if you apply for
multiple personal loans with them. This is just to ensure there are
no changes in status since the time you applied for a loan with
them. It also ensures that you still have the capability to repay
the loan.
5. Align your EMIs with Salary Hikes
When you’re juggling multiple personal loans and their payments, a
good rule of thumb is to increase your EMIs with every salary hike
you receive. This will enforce fiscal prudence and discipline. It will
also ensure that any additional income that you earn has an assigned
purpose. If you follow this diligently, you will, in all probability,
repay most of your loans on or before time.
6. Set-up Autopay
When you have
several personal loans, it might be difficult to keep a track of
all the payments. Invariably, you may end up missing a deadline
for paying your EMIs, which is not a very comfortable situation to
be in. It will not only lead to late fees but also damage your
credit score. One way to avoid being in this situation is to set
up automatic payments through your bank. If your bank account has
the required balance, you will never default on your payments.
Also Read: Top 9 Reasons for Rejection of your Personal Loan
To Conclude
While having multiple loans simultaneously is not a bad thing and
can sometimes be unavoidable, some strategies can help manage finances
better. Pay off loans that have a higher interest rate, a shorter
repayment period, and no prepayment charges first, and then move on to
loans with low-interest rates and longer payback terms; it would be
beneficial to try to end them early.
You can minimise your EMI
load and focus on the big loans more efficiently if you can close some
of your high-interest loans before their term ends. You can live a
debt-free life with a little effort and these strategies for managing
multiple loans. If you are considering debt consolidation
with a Personal Loan, Poonawalla Fincorp offers hassle-free and
speedy disbursements.