multiple personal loans

Can I Take Multiple Personal Loans at the Same Time?

You might have taken out a Personal Loan to buy a brand-new gadget, but before you could pay off the loan, your friends' group decided to take a trip to Thailand, and now you need money for that as well. So, what are you going to do? When you already have a Personal Loan, can you get another one? The answer is a resounding YES! 
You can obtain multiple Personal Loans simultaneously. However, as a borrower, you should be in a position to service all your loans well so that it does not affect your credit score. In fact, you should aim for preclosure of Personal Loans provided the lender you have chosen doesn’t levy any prepayment charges.   
Lenders typically discourage taking out multiple Personal Loans at once. However, it’s not necessary that your lender will restrict you from applying for more than one loan. If you have a strong financial and credit profile, you may be qualified for more than one loan from the same lender.  
 

Things to Consider Before Juggling Multiple Personal Loans

If you're considering taking out several Personal Loans, you should be aware of the following factors that could get impacted in the process, if the loans are not managed well- 

Credit Score  

As the Personal Loan is an unsecured loan, the applicant's credit score plays a much bigger role. Before approving a loan, lenders look at your CIBIL score. The importance of your CIBIL score increases if you choose to take out a second Personal Loan rather than your first loan. Most lenders generally consider a CIBIL score of 700 or higher to be good. 
Your credit repayment history will be investigated by lenders based on which they decide whether to approve your second loan or not. Choosing multiple Personal Loans at once is a little tricky, and one needs to ensure that they have the capability to pay off the loans in a timely manner.  

Repayment Capacity

It's essential for you to evaluate your repayment capacity before choosing to take out so many Personal Loans. This requires that you earn enough money each month to pay off your each loan in a disciplined manner.  
Lenders will find it difficult to trust you 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. In fact, it is prudent to have a payment plan ready before you apply for Personal Loans. This will help you get a sense of the financial outgo required once your EMI payments begin. 

ALSO READ :- Pro Tips to Manage Long-Term Personal Loans

Preclosure

If your lender doesn’t levy any prepayment penalty, then you should aim for the preclosure of Personal Loan. Depending upon 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 that has 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.  

Keep an eye on DTI

Debt-to-income ratio (DTI) is a very important parameter to keep in mind when it comes to availing of loans. Basically, it reflects the percentage of the borrower’s income that is utilized towards debt payments. A high DTI suggests that most of the income earned is directed towards servicing active debts. Conversely, a low DTI is reflective of 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 bump up your DTI, which could result in higher interest rates on consecutive loans. Generally, if your DTI is higher than 36%, you may find it difficult to qualify for a Personal Loan with low-interest rates.

Documentation

Some lenders may ask you for additional documentation if you apply for multiple Personal Loans with them. This is just to make sure that there is no change in status since the time you applied for a loan with them, and you still have the financial wherewithal to repay the loan.    

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 EMI outgo 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 retire most of your loans before time.   

Never miss a payment

This may seem like the most obvious factor, but it bears repeating nonetheless. When you have many Personal Loans, it might be difficult to keep 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 as well. One way to avoid being in this situation is to set up automatic payments through your bank. This will ensure that you’re never late in paying your EMIs. As long as your bank account has the required balance, you will never default on your payments.  
 

To conclude

In today’s world, it has become easier to fulfill our innate wishes and desires. There is so much to achieve and limited time to do that. Accepting some financial assistance to fulfill certain personal obligations and accomplish your ambitions is not wrong. However, you need to ensure that you keep track of all your loans and are disciplined in paying them off. Paying off loans with the highest interest rates and working down the list is the most prudent way to manage multiple loans. 

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