Is it possible to opt for more than one personal loan at once? Yes, it is possible. Is it advisable to opt for more than one personal loan? Well, that depends on how well you can handle multiple loans and the monthly payments through your income. However, generally, it is not recommended.
Disadvantages of having multiple personal loan accounts
Personal loans are unsecured loans and credit companies place high importance on the credit rating of an individual. There are high chances of the loan application being rejected simply because there have been multiple inquiries or “hard pulls” in your account. A high number of such hard pulls can lower your credit score substantially.
Banks scrutinize personal loan applications minutely and many applications can evince credit-hungry behavior by way of registering too many hard pulls in their credit profile. This type of behavior may be considered as a risk and may lead to rejection of applications.
In the short run, it may seem trivial. However, it will seriously hamper the future loan approval prospects of all possible loans. This happens because rejected applications are reflected in your account and lenders are wary of lending to a person rejected by several other lenders.
Another disadvantage is that an important parameter – the debt to income ratio is considered while handing out loans. A percentage of under 30% is considered ideal and some companies do consider a percentage of 50%. A borrower with a percentage of above 50% is considered too burdened and lenders will be pre-disposed to reject applications.
If you do have multiple loan accounts, you can manage these by following these steps-
- Don’t apply for additional credit
Having more than one unsecured loan is not advisable, so do not try to worsen the situation by applying for further credit.
- Clear loan EMIs on time to maintain a good score
EMIs are particularly important and even a single missed payment may ring the warning bells for lenders. So, to maintain the ideal score and healthy credit, make sure to make all payments on time every time. Making timely payments will also give you the opportunity to apply for a debt consolidation loan in future to clear multiple credit accounts in case you have too many.
- Choose a top-up to pay off more than one existing loan
You can try and go in for a top-up plan. Not many lenders will offer you one, but top-ups are a good option. With the top up amount, additional personal loans can be closed, and the multiple loan accounts managed.
- Save up any kind of additional income and pre-close loans
Just to maintain the credit balance make sure to divert every extra penny in your purse towards the repayment and finally the closing off multiple personal loan accounts
- Prioritize loan debt before credit card debt
While paying out monthly EMIs, prioritize and arrange for EMIs to be paid off first before paying for other expenses or debts. Loan defaults affect your credit score more than credit card defaults.
In conclusion, it can be said that having multiple personal loan accounts is not an ideal situation. Try to stick to a single loan or probably take a higher amount loan to cover all the possible financial needs instead of having multiple accounts. However, if you already have many loan accounts, carefully select and save each penny to close extra accounts, preferably those that have a high-interest rate.