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If you are in the middle of paying off a personal loan and suddenly come to realize that you need more money, it is quite natural to ask yourself if it is possible to get a second loan. Several reasons are cited here, such as medical emergencies, weddings, travel or unexpected expenses. One question reigns among borrowers to be answered, however: can you have more than one personal loan at the same time?
Yes — most lenders allow their customers to have more than one personal loan simultaneously, provided certain conditions are met. While a double loan is allowed by most banks, you cannot forget to check if it is financially wise for you, if it will affect your eligibility, and if you will be able to repay it.
How the multiple personal loans mechanism operates.
A personal loan is an unsecured credit which means it doesn’t need collateral. Therefore, lenders look at your income, credit score, and current liabilities to decide how strong your ability to repay is.
In case you have already one loan, the possibility of getting a second one depends on:
- Repayment track record
- Current EMI-to-income ratio
- Your credit usage
- Credit score
Many factors will be taken into consideration by the lenders before they decide to grant you the new loan. If your payment history is clean and your current liabilities are manageable, you might qualify for a second or even third personal loan.
Reasons why people consider having more than one personal loan at the same time.
- Different financial needs: You have been renovating your home and work thus far has gone smoothly, but suddenly you need money for a family emergency.
- Loan Top-Up Not Available: Some borrowers opt for a second loan if their existing lender doesn’t offer a top-up facility or if the amount they need is greater than the top-up would cover.
- Searching for Better Terms: There are cases when borrowers decide to take a second loan from a different lender that provides a low interest personal loan and then use it to settle the previous, more expensive debt or to consolidate several payments.
Key Factors Lenders Assess Before Approving Another Loan
- Credit Score: A good credit score (usually 700+) is indispensable. Having many loans at the same time can work against your score, so your lenders will be very careful in checking your credit report.
- Debt-to-Income Ratio: Lenders want your total EMI obligations not to be more than 40–50% of your net monthly income. If your first loan already consumes most of your salary, a second loan may not be approved.
- Repayment History: On-time and regular payments of your existing loan prove your financial discipline and therefore, your chances of a new loan being approved increase.
- Stable Employment and Income: Consistent income from a steady job is your strongest case. Changing jobs frequently or having an unstable income can cause problems in your repayment capacity.
Risks of Taking Multiple Personal Loans
Though the work may seem easy, however, there are significant risks that should not be ignored:
- Debt Accumulation: In fact, if your budget is tight because of multiple EMIs managing it can become a problem especially if you set aside too much for your savings and eat into your emergency fund.
- Interest Burden: If you don’t choose a loan with a lower interest rate, having more than one loan means you’ll have to pay more interest overall.
Impact on Credit Score
Every time you apply for a loan, it causes a hard pull on your credit report. Several inquiries made in a short period can lower your score and give the impression of being credit-hungry.
- Reduced Loan Eligibility: If in the future you want a big loan (for example for the purchase of a house or a car) then be aware that if you have many existing loans the amount of money you will be allowed to borrow can get lower or the interest rate can get higher.
Alternatives to Taking a Second Loan
It would be a good idea to consider the following options, before you go ahead and get a easy personal loan:
- Top-Up Loan: Find out if the financial institution you have chosen gives you the possibility of top-up. Usually, such loans are processed faster and come with a slightly better interest rate.
- Loan Restructuring: By increasing the tenure thus, by lowering the EMI, you can free up space for another loanHowever, you must negotiate this with the lender.
- Debt Consolidation: In case you have several small debts, you can merge them together with a single personal loan at a lower rate of interest, thereby making the payment of your debts not only easier but also cheaper.
- Borrowing from Other Sources: If the loan amount is small, borrowing from friends or family may be an interest-free short-term solution, provided repayment terms are clear.
Conclusion
One can have more than one personal loan simultaneously, however, their financial position and repayment capability will determine whether they should do so. Lenders take into consideration various factors like credit score, existing EMI obligations, and income stability while deciding if they will grant another loan. If such a move appeals to you, make sure that you are not stretching your financial limits too far. Give priority to a low-interest personal loan, arrange for your EMIs with care, and stay away from a debt trap as it is harmful to your financial health in the long term.