Because there are instances where one loan might not be adequate to meet a personal requirement, you could be thinking about applying for a new loan from a different lender. In addition to debating whether it is prudent to apply for a second loan or not, you must look at the factors that affect your eligibility for the second personal loan.
Repaying capacity
Before giving a borrower money, lenders want to make sure they can count on them to pay back the loan. Even if a borrower has a strong credit history and score, their variable income disqualifies them from receiving a loan. The size of the loan is heavily influenced by the income. This is crucial, particularly if you want to apply for a second personal loan.
Debt to income shouldn’t be higher than 50%. You shouldn’t have more debt than half of your monthly income, including the second personal loan you’re requesting. It is quite unlikely that you will receive additional credit if it does.
Credit score
Let’s take a look at a different scenario in which you earn a good living, already have a personal loan, but your credit is bad because of past financial misdeeds. Are you going to be qualified for a new personal loan? In this case, the impact of past credit activity on the credit profile has a significant impact on eligibility. The new personal loan eligibility is negatively impacted by erratic credit behavior, such as “settled” and “written-off” accounts.
Where can you apply for a second personal loan?
In addition to keeping in mind that a personal loan is active and has stringent eligibility standards, you must be aware of the deadline for applying for a new loan. After acquiring the first personal loan, the borrower must at least wait for six months. If you apply soon after paying back the initial loan, you can get a flat-out refusal. Hard inquiries and rejections might significantly lower your credit score.
Alternatives to second personal loan
Based on your strong repayment history, the majority of banks and NBFCs now offer top-up loans on the current personal loans. It can be a viable alternative to starting again with a new loan application. This might also prevent hard inquiries and loan denial. However, the top-up loan could only be used after the lock-in term was up.
Loan against fixed deposit
You can always choose a secured loan against your fixed deposit from any of the lenders as an alternative to an unsecured personal loan. The benefit of choosing this loan is that it will add the necessary credit mix to your profile because a loan against an FD is secured when a personal loan is unsecured. Your FD will serve as security or collateral for the borrowing amount.
You must keep in mind that, unlike a personal loan, where you would receive 100% of the loan amount, you will not receive the whole value of the FD. It will depend on the total amount of your FD. For instance, if the value of your bank’s fixed deposit is INR 5 lakh, you will be eligible for a maximum loan of INR 4 lakh, or 80% of the FD’s value. Additionally, the interest rates will be considerably lower than those for personal loans.
Loan against gold
Numerous lenders offer loans against your gold jewelry and even gold coins. Simply present the lender with your gold ornaments, and they will issue you a loan for up to 80% of the total value of the ornaments’ market worth. This sum may be repaid over a maximum of five years.
Conclusion
A second loan is ultimately a second duty that can drain your bank account. Consider your income and monthly expenses when considering whether to apply for a second personal loan.
