Tips to manage loan accounts

How Can You Effectively Manage Multiple Loans?

June 23, 2022 • 4098 views

It's not uncommon for people to borrow multiple loans at the same time. A large percentage of families with a home loan also have a vehicle loan. Today, borrowers have a wide variety of options with a plethora of lenders offering term loans at competitive interest rates, allowing customers to obtain loans quickly and easily.

Having multiple loans does not mean that you will end up submerged in debt. You can keep your debt from spinning out of control and gradually get out of it with good money management.

Let's take a look at some methods you can use for managing multiple loans.

1. Keep It Manageable

Firstly, you want to ensure that all your EMIs are at a level that will not jeopardize 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. For example, if your monthly earning is Rs 30,000, paying 40% of it would put a strain on your ability to manage your other expenses. If your income is Rs 2,00,000 and you don't have any dependents or large debts, you could be able to pay even Rs 1,00,000 or more in EMIs. You can make use of an online term loan calculator to plan your loans and manage them.

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 suffer. So, if you have multiple loans, make an effort to pay off all of your EMIs on schedule. It is best to avoid taking a new loan to pay a pending one, as this is the perfect recipe for a debt trap. If you are having trouble repaying multiple EMIs at the same time, you can ask your lender to prolong the repayment period and reduce the EMI amount.

3. Prioritize Personal Loan EMIs Before Credit Card Dues

It is best to pay off your Personal Loan dues first and then your credit card account because defaults and late payments on Personal Loans have a greater impact on your credit score than those on your credit cards. Defaults on Personal Loans can have a significant impact on your credit score lowering it by nearly 50 points at a time. In a situation like this, you must prioritize your payments.

4. Go for A Debt Consolidation Loan

Obtaining a debt consolidation loan and consolidating all debts into a single source 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. It must be noted that Personal Loans have lower interest rates than debt consolidation loans. Debt consolidation loans are usually offered by major private lenders. Hence, you will need to check whether your lender can offer you one. When issuing a debt consolidation loan, banks typically consider several factors such as employment stability, credit history length, and relationship with the bank.

5. 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 may focus on pre-closing, ensure that you pre-close the loan account with the highest interest rate first, and prioritize your loan accounts over your credit card accounts. A term loan calculator will help you determine just how much you can save by paying off the costlier loans before tenure completion. 

6. Keep A Close Eye on Your Expenses

It is best to watch where you are spending, so you can set aside the income needed to pay off your debts. Start by making a list of your expenses and categorizing 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 also pay off your loans sooner.

7. 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. This may spiral into a bigger problem if you do not service your loans.

8. Don’t take Small Loans to Manage Monthly Repayments

You may be tempted to borrow a small loan to pay off one or more of your loans' monthly payments but refrain from this. Instead, spend on other things only after you have paid off your debts. Also bear in mind that applying for more loans will hurt your credit score.

To Sum It Up

While having multiple loans simultaneously is not a bad thing and can sometimes be inevitable, some strategies can help manage finances better. It is best to pay off the loans with the highest interest rates first. 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 minimize 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 clever strategies for managing multiple loans. Moreover, Poonawalla Fincorp can aid you with hassle-free and speedy disbursements if you are considering debt consolidation with a Personal Loan. Use Poonawalla Fincorp’s online term loan interest calculator to plan your loan repayment effectively.


We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
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poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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