Can You Take Multiple Personal Loans at the same time?

A Personal Loan is one of the easiest loans to obtain. Almost all the banks and NBFCs (Non-Banking Financial Companies) have different types of personal loan. They range for the simple unsecured Personal Loan to the secured ones.

The question before us is, “Can a person have multiple Personal Loans?”

The answer is “Yes”. We shall see how it is possible. However, before that, we shall see the concept of Personal Loans.

What is a Personal Loan?

A Personal Loan is a loan you take to cater to personal expenses. Now, personal expenses can be anything ranging from going on a vacation to medical expenses. Let us look at some of the most common reasons why people take Personal Loans:

• Marriage expenses
• Higher education of children
• Medical emergencies
• Home renovation
• Margin for Home Loans
• Buy consumer goods
• Business requirement
• Any other personal purposes except speculation and illegal activities

What are the Eligibility Criteria?

All individuals are eligible for a Personal Loan provided they satisfy the following conditions:

• Earn a stable income from a regular source
• Have a credit score of 700 and above

The regular source of income can be from salary, business, profession, and so on. The applicant should prove to the financer the continuity of income.

The Different Types of Personal Loan

Unsecured Personal Loans

The unsecured personal loan is the most popular of all the Personal Loans in the market. The most significant advantage of this type of Personal Loan is that you need not provide any security to the bank. Secondly, there is no need for disclosing the end use of funds. It is your responsibility not to use the loan for restrictive purposes like speculation and illegal activities.

Secured Personal Loans

As the name suggests, these Personal Loans are loans backed by collateral. The collateral can be any tangible security having value more than the loan amount. Some of them are as follows:

• Property
• Gold ornaments
• LIC Policies
• Government securities like NSC, KVP, and so on
• Fixed Deposit of the same bank

The Unsecured Personal Loan vs. the Secured Personal Loan

• Both the loans are easy to get
• The unsecured loans follow the most straightforward procedure, and it takes minimum time
• The rates of interest for an unsecured Personal Loan are more than that of the secured Personal Loans.
• The borrower needs to have a credit score in the range of 700 and above (depends on the bank) for availing an unsecured personal loan.

Other than the loans against property, banks do not call for the credit history in any of the secured personal loans mentioned above. The borrowers opting for a Loan against Property should have a minimum credit score of 600 and above (depending on the bank).

Can You Have Multiple Personal Loans?

Yes, there is no problem if a borrower has multiple Personal Loans provided they satisfy the income eligibility norms and have an excellent credit score:

How Do You Maintain an Excellent Credit Score?

The credit score depends on a variety of factors:

• Repayment record: Maintaining an excellent repayment record without missing a single loan instalment can improve your credit score.
• Outstanding loans: The higher the amount of outstanding loans, the lower is your credit score.
• Credit utilisation ratio: The credit utilisation ratio is the proportion of your loan outstanding amount to the total limits sanctioned by the banks. The lower the ratio, the higher is your credit score. The ideal credit utilisation ratio is around 30% to 35%.
• The ratio of secured loans to unsecured loans: One should maintain a healthy balance between the secured and the unsecured loans like the Credit Cards and Personal Loans.
• Length of credit history: The longer your credit history, the higher is your credit score.

Does Availing a Personal Loan Affect the Credit Score?

Every time you avail a loan, the credit score reduces. You can bring it back to normal by maintaining an excellent repayment record. Therefore, you can avail unsecured Personal Loans until your credit score remains above 700. If the score dips below this figure, it becomes difficult for you to get Personal Loans. However, you can always go for the secured Personal Loans like the ones mentioned earlier in this article.

Therefore, we sum up in a single sentence, “You can avail multiple Personal Loans as long as you maintain your credit score, and satisfy the income criteria.”