How Many Personal Loans Can I Have at a Time?

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Personal loan is a type of unsecured loan that you can avail to meet various financial needs. Its ease of accessibility and quick processing makes it a preferred choice for many, especially during financial emergencies. With the rising lifestyle aspirations and the fact that unforeseen expenses can arise anytime, having just one personal loan may not always be enough.

But is it possible to have more than one personal loan at a time? Or, is there a limit to the number of personal loans that one can apply for? To find answers, read further.

Can I have more than one personal loan at once?

It is possible to have more than one personal loan at once. Neither RBI nor any lending institution has set any guidelines or imposed any restriction on the number of personal loans that one can apply for or avail at a time. However, doing so can negatively impact your credit health and may have serious financial implications if the debt is not handled well.

What factors do lenders consider before approving your next personal loan application?

When you are already servicing a personal loan, getting approved for the next can be a bit difficult. To get approval on your next personal loan application, of course, you would have to meet the loan eligibility criteria set by the lender, however, these two factors would also greatly impact your loan approval chances:

Sufficient Repayment Capacity

You can avail multiple personal loans from multiple lenders at the same time, provided the lender of your second personal loan is satisfied with your loan repayment capacity. Lenders usually prefer sanctioning personal loans to those having their total EMIs, including the EMI of the proposed loan, within 50-60% of their monthly income. Exceeding this limit could minimise your chances of availing the loan or the desired loan amount. Therefore, if possible, instead of availing multiple personal loans, try to avail a single loan of a larger amount from the lender that offers lower interest rates and/or better loan terms.

Clean Repayment History

Besides, looking at your repayment capacity, lenders will also check your credit score and credit report to see how you dealt with the credit in the past. They will also check if you are consistent with your ongoing loan’s repayment.

Will having multiple personal loans affect my credit score?

Before Availing the Loan

Making multiple applications for availing a personal loan within a short span can cause your credit scores to drop slightly. However, such change is usually temporary. This happens when a lender pulls your credit report as part of their loan process. Such lender-initiated credit checks are known as hard enquiries, which can reduce your credit score by a few points. However, in case of pre-approved loans, this will work differently.

Banks and NBFCs offer pre-approved personal loans to their existing customers based on their credit profiles. For this, they fetch credit reports of their customers from credit bureau(s). However, such credit checks are known as soft enquiries and are not reported in the individual’s credit report and thus, does not affect an individual’s credit score.

After Availing the Loan

Having multiple personal loans also increases the risk of missing EMI(s), which could attract late payment fees and may also hurt your credit score. Avoid this by putting your loan EMI payments on autopay. Also, ensure that you have enough money in your bank account to cover the EMI payments. Having insufficient account balance will cause you to miss your EMI payments and attract late payment charges and other penal charges such as EMI bounce charges.

What are the Risks of Having Multiple Personal Loans?

These are the downturns of having multiple personal loans:

• Increased interest cost: Personal loans are unsecured and therefore, usually are offered at higher interest rates than its secured loan alternatives. Having such multiple high-interest loans means paying interest on each, resulting in significant increase in the total interest outgo.
• Impact on credit score: Applying for personal loan with multiple lenders within a short period can reduce their credit scores due to multiple hard enquiries. Having multiple personal loans simultaneously also increases the risk of default, which if happens can reduce your credit score considerably and also the chances of availing credit in the near future.
• Limited access to credit: Servicing multiple loans at the same time reduces your ability to borrow more for financial emergencies or to cover immediate expenses as lenders may consider you as a high-risk borrower.

Words of Advice

If you already have a personal loan and need more funds, consider availing options like:

• Top-up loan facility on the existing personal loan.
• Try to avail a single loan of a larger amount from the lender that offers lower interest rates and/or better loan terms.
• Secured loans such as loan against property, etc. as they come at lower interest rates and due to its secured nature have less stringent eligibility conditions.