When it comes to the rules governing the use and application of personal loans, there is no end limit so to how many personal loans one can apply for. However, people take only one personal loan at a given time so that they can manage the EMI repayments efficiently without straining their budget.
But sometimes, you may find that people have taken two or more personal loans to have a backup option whenever they need emergency money. There are some advantages and disadvantages of taking two or more personal loans. Those pros and cons are discussed in this article so that you can understand the procedure and decide about your next personal loan plan.
Advantages of Taking Two or More Personal Loans
Quick Access to Funds
Sometimes, one personal loan may not be sufficient to meet your financial needs. Though you can get up to Rs. 25 lakh with a single personal loan, most lenders limit the loan amount to 30 times your monthly income. So, if your monthly income is Rs. 45,000, you can get a maximum loan of Rs. 13.5 lakh.
If you need more funds, taking multiple loans can help. Since the approval process is seamless and quick, you can quickly arrange the needed funds.
You may improve your credit score.
If you have taken multiple loans, you have to plan for your repayment. If you repay all the loans on time, it will enhance your credit score to a great extent. This factor will give you a lot of benefits for future loan applications. That is why if you have thought of taking multiple loans, then you should also have a proper plan to repay those loans. Then only will you have a good credit score, and you will become a credible customer for the lender to have a quick personal loan approval next time.
Flexible Financial Planning
Have you been postponing your Europe trip for months because you’re saving to buy your favorite car? It happens. Many salaried individuals have rigid budgets, and they often have to drop some of their dreams due to a lack of funds.
Multiple personal loans add flexibility to your finances. You can do multiple things, such as buying a car, going to Europe, throwing a party, etc., all at once without postponing your plans.
You can ensure your financial security.
If you are trying to build a business by taking up a personal loan, then multiple loans can help you have better security in your financial matters. Suppose you need money immediately and one loan cannot give you that, then the other ones can be a great option for you to have proper support in your business. Security is one of the main reasons people take two or more personal loans. So, if you want more financial security, you can opt for multiple personal loans.
Disadvantages of Taking Two or More Personal Loans
Constant Mental Pressure
The more loans you have, the more mental pressure you’ll incur. Having debt is never a good feeling, and having multiple loans can make things worse. You’ll constantly think about the personal loan rates and how to repay them. If, by chance, you default to repay the loan, you’ll get frequent visits from recovery agents, which could be stressful.
Having multiple loans also means you’ll need to have a stable income every month until you repay your loan completely. If you don’t have a stable income, you’ll need to pay the EMIs from your savings, which will affect your finances.
High EMIs and Little to No Savings
Multiple loans attract multiple EMIs, and if you have several loans, a large portion of your income will go into paying EMIs. The more EMIs you pay, the less disposable income you’ll have. After taking care of your regular expenses, you may be left with too little savings, if any. This will prevent you from building or growing your emergency fund, and you’ll face difficulties in saving money or investing it.
Lower Standards of Living
Since you’ll have low disposable income, your quality of living could decrease. If you’re used to living a luxurious life and spending money on parties and vacations, you may not be able to live the same way until you pay back your loans. People with multiple loans have to live frugally until they repay their loans.
Verdict: Should You Get Multiple Loans?
The ultimate question is should you get multiple personal loans. The answer is, it depends. If you have the income and savings to repay multiple loans without disrupting your finances, quality of life, and mental health, you can take multiple loans. If you aren’t financially strong, it’s best to avoid taking multiple loans unless necessary.