Taking a personal loan is an efficient way to manage outstanding financial liabilities or emergencies. While your income can seamlessly cover your living expenses, situations like medical emergencies, home repairs, vehicle repairs, or weddings can force you to seek quality credit from a reliable source.
Even when you have availed of a personal loan to pay for some need, another financial emergency can arise. In such situations, you may need to take out another personal loan. But can you do it without hurting your savings and credit score? Are there any alternatives? And what’s the way to go about it?
Here are all the answers you need.
Can you take a small personal loan while repaying another personal loan?
Yes, you can take multiple personal loans at a time as long as you meet the lender’s eligibility criteria. Typically, personal loans range between Rs. 75,000 and Rs. 25,00,000, with a starting personal loan interest rate at 10.99% per annum. Based on your income, credit score, and ability to repay, you can apply for any number of personal loans as and when the need arises.
Is there an alternative?
Personal loan providers also give an overdraft facility or a credit extension facility. This feature allows you to avail of an overdraft if your financial needs change during the tenure of an ongoing personal loan. Interest is charged only on the additional amount, and the repayments can be clubbed together.
However, the overdraft credit is limited to your loan eligibility and lender’s TnC. If you need more than the one covered by the overdraft facility, it is better to apply for another small personal loan.
What are the eligibility criteria for a small personal loan?
When you apply for a small personal loan, the eligibility criteria checked by your current or new lender are mostly the same that were there for the previous personal loan.
This includes three primary parameters:
- Your Ability to Repay the Loan (or income): This is the most critical parameter for any lender to extend an unsecured loan. Since even the most minor personal loan can be availed without any collateral, the lender must ensure that you have a steady income in-flow through which you can repay the loan principal and interest. Hence, lenders require you to submit your salary statements for the past six months while applying for the loan.
- Your Current Liabilities (or outgo): This tells a lender your current outstanding and whether you will be able to manage an additional EMI with a new loan. To gauge this, lenders require submitting your bank statement of the last three months at the time of loan application.
- Your Credit History and Score: If you have taken on a personal loan or loan of any other kind in the past and have been successfully repaying it, you will have a healthy credit score. This reduces lending risk and makes you an eligible candidate for one or multiple unsecured loans.
In addition to these, you are required to submit your identity and address proof documents such as PAN card, Aadhar card, Passport, Voter ID card, Driver’s licence, etc., to complete the KYC for the loan application.
In conclusion, you can take a small personal loan even if you are still repaying a personal loan.
It’s best to check the current individual loan interest rates to decide whether to request an overdraft or credit extension in your existing loan or opt for a separate small personal loan.
Also, if your credit requirement is more than the overdraft facility, it is better to take out a new small personal loan from your current lender without much hassle.