Personal loans offer a convenient way to finance major expenses, whether it’s home renovations, weddings, education, or unforeseen financial needs. With quick online applications and instant approvals, they have become a go-to option for borrowers. However, a common question arises – how many personal loans can one take at a time? While there are no legal restrictions, taking multiple loans can have serious financial implications.
Recent changes introduced by the Reserve Bank of India (RBI) have made it more difficult for people looking to avail multiple personal loans. The central bank has mandated lenders to update credit records every 15 days instead of the previous monthly cycle. This would make it difficult for borrowers to secure multiple loans. As part of these new norms, lenders are now required to report borrower activity to credit bureaus twice a month rather than once.
Additionally, frequent updates help mitigate risky financial practices such as “evergreening,” where borrowers continuously take out new loans to repay existing ones, thereby masking financial distress. By shortening the reporting interval, credit bureaus and financial institutions can gain a more precise and real-time understanding of borrower behaviour.
Is There A Limit To The Number Of Personal Loans One Can Avail?
The Reserve Bank of India (RBI) does not impose any restriction on the number of personal loans a person can take. However, banks and financial institutions have their own policies, which can limit borrowers to a specific number of loans at a time. Lenders assess a person’s repayment capacity before approving additional credit.
Factors To Consider Before Applying For Multiple Personal Loans
- Interest Rates: Interest rates play a crucial role in determining the overall cost of borrowing. Each personal loan you take may come with a different interest rate based on the lender, your credit score and other financial factors. It’s essential to compare interest rates before applying for multiple loans to ensure you’re getting the best deal. A higher interest rate can significantly increase your repayment burden, so always aim for loans with the lowest possible rate.
- Processing Fees And Other Charges: Lenders usually charge processing fees, prepayment penalties and late payment charges on personal loans. If you’re managing multiple loans, these additional fees can add up quickly, making repayments more expensive. Always check for hidden fees and consider them while calculating the total cost of borrowing.
- Loan Tenure: The loan tenure determines the repayment schedule and the monthly instalment amount. While longer tenures may reduce your monthly payments, they also lead to higher interest payouts over time. On the other hand, shorter tenures mean higher EMIs but lower interest costs. When juggling multiple personal loans, it’s essential to maintain a balanced tenure structure that aligns with your repayment capacity.
- Debt-To-Income Ratio: Before applying for multiple loans, a borrower needs to understand loan eligibility. Banks usually approve loans up to six to eight times a borrower’s monthly income. If existing loans have already touched this threshold, securing an additional loan would not be possible.
- Credit Score Impact: Each loan application results in a hard inquiry on your credit report, which can temporarily lower your credit score. Holding multiple loans increases overall debt, making it harder to maintain timely repayments. If income does not rise in proportion to debt, the risk of default grows, which can lower the credit score. Late payments on even one loan can have a lasting negative impact.
- Monthly Repayment Burden: Managing multiple EMIs can be challenging, especially if your income remains constant. It’s important to calculate your total monthly repayment obligations and ensure they do not exceed 40-50% of your monthly income. If your repayment burden is too high, you might struggle with financial liquidity, leading to missed payments and penalties.
- Loan Purpose And Necessity: Before taking multiple loans, assess whether they are absolutely necessary. Avoid taking on additional debt for non-essential expenses. Instead, prioritise loans for critical needs like medical emergencies, education, or home renovations.
You can compare and choose the most affordable personal loan on Moneycontrol’s digital lending platform. Moneycontrol offers multiple personal loans up to Rs 50 lakhs in partnership with eight lenders. The application process is 100% paperless and the interest rates start as low as 10.5% per annum.
How To Manage Multiple Personal Loans Effectively
- Prioritise repayments: Pay off high-interest loans first to reduce financial strain.
- Consolidate loans: Consider a debt consolidation loan to combine multiple loans into a single one with a lower interest rate.
- Automate payments: Set up automatic payments to avoid late fees and penalties.
- Avoid new loans: Until existing loans are repaid, refrain from taking additional loans.
Taking multiple personal loans can be a viable option, but it requires careful financial planning.
You can get instant access to a 100% digital personal loan through Moneycontrol, with zero paperwork and a minimal processing fee. All you need to do is enter your details, complete the KYC verification process and set up your EMI plan. Moneycontrol has partnered with eight top lenders to offer instant loans of up to Rs 50 lakhs. The interest rates for these loans start at 10.5% per annum.
Summary
Thinking of taking more than one personal loan? While it’s possible, doing so requires having a clear repayment plan as multiple personal loans can impact your credit score and strain your finances.
Disclaimer
This piece/article was written by an external partner and does not reflect the work of Moneycontrol's editorial team. It may include references to products and services offered by Moneycontrol.
About the Author
Fintech
Stay updated on the latest personal finance trends, with a focus on products like credit cards, credit score, personal loans, fixed deposits, and more
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