Can You Opt for Multiple Personal Loans in India?

Last Updated : March 26, 2020, 8:06 p.m.

It can happen that you have taken a personal loan to buy the latest launched gadget but till the time you buy it, your friends’ group suddenly planned a trip to Thailand, now you need funds for this also. So what will you do? Can you take another personal loan when you already have one? Well, the answer is yes!

Yes, you can take more than one personal loan at a time. But, often it is advised to not take multiple loans due to some reasons. One of the major reasons is the impact it can have on your credit score in case you miss repayments of any loan.

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Usually, lenders do not allow multiple personal loans at once. You can opt for another personal loan from some other lender. But even if you are eligible for a personal loan from another lender, it is not a wise and smart decision to apply for multiple loans at once. Because opting for a second personal loan could be riskier and more expensive for you and this decision can ruin all your finances. There are a few factors that are essential for deciding whether you should opt for multiple loans or not.

Factors that you Must Check before Opting for Multiple Personal Loans

If you are thinking to opt for multiple personal loans, you must know about the unsecured nature of personal loans till now. So you can imagine the repercussions of multiple personal loans at once. We are providing you some factors that you must keep an eye on before opting for multiple loans. Do check them below!

Credit Score

As the personal loan is an unsecured loan, the role of an applicant’s credit score becomes so much more important. Lenders check your CIBIL score before sanctioning the loan amount. And when you decide to opt for a second personal loan over your first loan, your CIBIL score becomes more crucial. A score of 700 or above is generally hailed as a good CIBIL score across lenders.

Lenders will check your credit repayment history and on that, they will decide whether it will be okay to give you a second personal loan or not. But still, opting for multiple personal loans at once is too risky and if not anything urgent, individuals should avoid it.

Repayment Capability

Before opting for multiple personal loans, it is important for you to check your repayment capability. By this, we mean that whether you have enough monthly income to pay multiple personal loans individually or not. Because if you have not enough income to pay the EMI every month, lenders will not sanction your loan amount, and you will not be able to get multiple personal loans.

If more than half of your salary is going towards paying EMIs, lenders will have a tough time trusting you as they will have a greater credit risk while giving you the loan. Ideally, less than 40% of your salary should be going towards any kind of debt. Understand this through an example.

An individual with a monthly income of INR 70,000 already has a personal loan of INR 4 lakhs at an interest rate of 12% per annum for a period of 5 years. So, according to his loan details, he must be paying an EMI of INR 10,534.

With the mentioned income, he could easily put out INR 35,000 (50% of 70,000) as the amount that he can spend on EMIs.  So, after paying the EMI of around INR 10,000, he could still afford the loan amount with a maximum of INR 25,000.

As you can see that an individual with high monthly income can afford multiple personal loans but it would not be wise for an individual with a low income to opt for a second personal loan.

If you are really in need of funds, there are some other ways that you can opt for instead of opting for multiple personal loans. These methods will also help you in getting the required funds in a hassle-free manner.

Other Loan Options that you can Choose Instead of Multiple Personal Loans

You can have a look at some of the other options instead of two personal loans mentioned below. These methods will help you equally as a personal loan and your debt burden will also be less.

Loan Against Fixed Deposit

Instead of an unsecured personal loan, you can always opt for a secured loan against your fixed deposit from any of the lenders. The good thing about opting for this loan is that it will bring in the much-needed credit mix in your profile as a loan against FD has a secured nature while the nature of a personal loan is unsecured. Your FD will act as the collateral or security against your loan amount.

You need to remember that you will not get 100% of the FD value as the loan amount unlike 100% loan amount in the personal loan. It will depend on your overall FD amount. For example, the value of your fixed deposit in the bank is INR 5 lakh, so you will get the maximum loan amount of INR 4 lakh which is 80% of your FD value. The interest rates will also be much lower than personal loan interest rates.

Loan Against Gold

Several lenders provide loans against your gold ornaments and even gold coins. Some of them are State Bank of India (SBI), Axis Bank, Kotak Mahindra Bank, etc. You just have to submit your gold ornaments to the lender, and based on the value of those ornaments, lenders will give you a maximum of 80% of the total value as the loan amount. You can repay this amount over a maximum of 5 years.

So, you can see other options apart from multiple personal loans. Now, the decision is left to you to decide whether you want to apply for multiple loans or opt for something else to fund your needs? Choose wisely!