Sometimes, a single loan may not be adequate to meet a personal need, hence you might be thinking of applying for a new loan from another lender. Besides debating on whether it is right or not to go for a second loan, you must analyse the factors that constitute your eligibility in obtaining the second personal loan.
Repaying Capacity
An ability to repay the loan is what the lenders want to be assured of while disbursing the loan to an individual. An applicant may have a robust credit history and credit score, but an inconsistent income makes the person ineligible for the loan. The income also plays a crucial role in determining the loan amount. This is vital especially when you want to apply for an additional personal loan.
Debt to income ratio should not be above 50%. Your overall debt including the second personal loan you are applying for should not consume more than half of your monthly income. If it does, it is highly improbable you will get further credit.
Credit Score
Let’s consider another scenario, where you have a handsome income, already have a personal loan, but a poor credit score due to past credit mistakes. Will you become eligible for a new personal loan? In this case, the eligibility largely depends on the past credit behaviour and its impact on the credit profile. Erratic credit behaviour such as ‘settled’ and ‘written-off’ accounts are detrimental to the new loan eligibility.
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Such an applicant can become eligible for a new personal loan, but the terms and rates could shatter the saving plans as the interest rate could be higher.
When Can You Apply for Second Personal Loan?
With a personal loan being active and having good eligibility criteria, you must also be aware of the time of applying for a new loan. The borrower must al least wait for minimum of 6 months after receiving the first personal loan. Applying within a short-period of servicing the first loan could lead to outright rejection. Hard enquiries and rejections can damage your credit score considerably.
Alternatives to Second Personal Loan
Most of the banks and NBFCs now offer top-up loans on the existing personal loans based on your good repayment record. It could be a viable option instead of applying for a new loan all over again. This could avoid loan rejection and hard enquiry as well. However, top-up loan could be availed only after completion of the lock-in period.
If you are looking for a small loan amount, a short-term loan from online lenders can be obtained easily. Some of the lenders provide a certain percentage of your monthly salary in advance at low interest rate.
Secured loans such as gold loans, home mortgage etc. are other options that are best alternatives to second personal loan.
End Note
An additional loan is ultimately an additional responsibility that can put a hole in your pocket. Consider the impact on your income and monthly expenses and make up your mind to go for a second personal loan.