More Than One Personal Loan, Is it Possible or Not?

Often considered an efficient way to handle planned and unplanned expenses, personal loans are preferred as they do not require pledging any security or collateral against the loan amount. However, while already having a personal loan under your name, situations could arise where you need additional money to deal with an unforeseen emergency. In such a scenario, you might want to acquire another personal loan from the same or different lender at the earliest. 

Even though it is feasible that you apply for another urgent personal loan for accumulating extra funds, the associated factors and consequences must be analyzed meticulously before taking the final decision so that it does not land you in a financial mess. A significant issue in opting for one more loan agrees to pay another monthly installment along with the existing loan EMI that could trap you into a never-ending debt cycle. Hence, one should assess their monthly income to expense ratio and compute the EMI amount using a personal loan calculator in advance to plan the finances accordingly.

Scroll down to know whether taking multiple personal loans is possible or not.

While one could easily apply for an additional personal loan to fulfill the immediate requirement of substantial funds, acquiring multiple loans is a risky business as it would affect your overall financial standing and stability. Although financial institutions offer personal loans at an affordable rate of interest and flexible repayment tenure, one must be prepared to encounter various other loan-related factors while opting for a second personal loan, such as:

• Credit score

Your credit health plays a significant role in deciding whether you are eligible for a loan or not. Although a score of 700 or above is deemed an excellent CIBIL score, the lenders examine your credit repayment history thoroughly before approving your request in the case of another loan. While taking a second loan is sure to decrease your CIBIL score, it shall also be affected if you delay payments or cannot repay the loan.

• Repayment capacity

Another crucial thing to worry about while opting for a second loan is your loan repayment capability. The lenders would indeed assess whether you earn sufficient income to pay off the EMIs of both the loans every month without any hassle. In case more than 40% of your earnings are used to pay your debts, another personal loan might not be sanctioned at all.

• Increased debt and stress

While initially, it may sound like a convenient option to obtain another loan for handling expenses, it could take a toll on your mind and give you sleepless nights later on. Debts will constantly surround you until the loan is completely closed.

• Impact on the financial condition

Last but not least, your financial condition is sure to take a hit with multiple EMIs to pay off every month, and it might affect your daily expenses. Therefore, one must have a steady source of income to opt for a second personal loan. Else it could land you in a pile of mess.

Alternate Options

Instead of taking multiple personal loans, there are several substitutes available in the market for acquiring a significant amount of money, such as:

• Loan against fixed deposit

A viable option to acquire funds is applying for a secured loan against your fixed deposit (FD). Due to the secured nature of an FD, the levied interest rate by the lender will also be lower compared to the personal loan interest rates.

• Loan against securities

Another feasible route to get the money is pledging your financial assets such as stocks, mutual funds, or insurance as collateral against the loan amount. In this loan, the borrower gets a limit up to which they can deposit amounts per their convenience.

• Loan against gold

Various lenders also provide money against your gold ornaments or gold coins which seems like an excellent alternative to a second urgent personal loan. Provided up to a maximum of 80% of the gold value, the loan amount can be conveniently repaid over five years. 

• Loan against property

One more way to obtain sufficient funds is by applying for a loan upon pledging or mortgaging your property against the loan amount. A secured form of loan will not negatively impact your CIBIL score, and you will regain complete control of your asset as soon as you close the loan.