Personal Loan: Taking more than one personal loan can be costly, significantly impacting your credit score and EMI

Multiple Personal Loans Can Hurt Your Finances: Big Impact on Credit Score and EMI Burden

Taking a personal loan has become extremely simple in today’s digital age. With instant approvals, minimal documentation, and quick disbursals offered by banks and NBFCs, many people now see personal loans as an easy solution for urgent expenses. However, what often goes unnoticed is the risk of taking more than one personal loan at the same time.

While multiple loans may seem like a practical way to manage rising expenses, experts warn that this habit can seriously damage your financial stability, credit score, and mental well-being. Let us understand why taking multiple personal loans can prove costly and how it affects your overall financial health.

Why Are Personal Loans Increasing So Rapidly?

Rising inflation, medical emergencies, lifestyle expenses, and sudden financial needs have pushed many individuals toward personal loans. Since these loans do not require collateral and are easy to access through mobile apps and online platforms, borrowers often take them without much planning.

Banks and NBFCs also aggressively promote pre-approved offers, making it tempting to borrow again even when an existing loan is already running. As a result, many people end up managing two or more personal loans simultaneously, which can create long-term financial stress.

Impact on Debt-to-Income (DTI) Ratio

One of the biggest risks of taking multiple personal loans is the negative impact on your Debt-to-Income (DTI) ratio. DTI shows how much of your monthly income goes toward repaying loans.

For example:

• Monthly income: ₹50,000

• Total EMI payments: ₹25,000

This means 50% of your income is already committed to debt repayment. A high DTI ratio is considered risky by banks and credit agencies, as it indicates limited repayment capacity.

When your DTI ratio rises:

• New loan approvals become difficult

• Creditworthiness declines

• Financial flexibility reduces

Lenders prefer borrowers with lower DTI ratios, as they are seen as financially stable.

Negative Effect on Credit Score

Your credit score is a reflection of your borrowing behavior and repayment discipline. Multiple personal loans increase your monthly EMI burden, making it harder to manage repayments smoothly.

If even one EMI is delayed or missed due to cash flow issues:

• Your credit score starts falling

• Late payment penalties are applied

• Loan accounts may be marked risky

A lower credit score can create serious problems in the future. You may face:

• Higher interest rates on loans

• Loan rejection

• Difficulty getting credit cards or home loans

Maintaining a healthy credit score becomes challenging when multiple EMIs are running simultaneously.

Rising EMI Burden and Mental Stress

Managing several EMIs every month is not just a financial challenge—it also leads to mental pressure. Different EMIs are often deducted on different dates, increasing the chances of missing payments.

The constant worry of:

• Maintaining minimum account balance

• Avoiding late fees and penalties

• Handling unexpected expenses

can cause anxiety and stress. Over time, this pressure affects productivity, personal life, and overall peace of mind.

Higher Risk of Loan Traps

Multiple loans can easily push borrowers into a debt trap, where a new loan is taken to repay an older one. This cycle increases total interest paid and prolongs financial dependence on credit.

Instead of solving financial problems, repeated borrowing often deepens them.

What Do Financial Experts Recommend?

Financial experts advise borrowers to:

• Avoid taking more than one personal loan unless absolutely necessary

• Focus on repaying the existing loan on time

• Review monthly income and expenses before borrowing again

• Consider alternatives like loan consolidation or restructuring if EMI burden is high

If an additional loan is unavoidable, it is important to reassess affordability and long-term repayment capacity.

Final Thoughts

Personal loans can be helpful during emergencies, but taking multiple loans at once can weaken your financial foundation. A high DTI ratio, falling credit score, rising EMIs, and constant mental stress are clear warning signs.

Before applying for another personal loan, take a step back and evaluate your finances carefully. Responsible borrowing and disciplined repayment are the keys to maintaining long-term financial health.

Disclaimer:
This article is for informational purposes only. Loan terms, eligibility criteria, and credit assessment policies may vary across lenders. Readers are advised to consult financial experts or official lender sources before making borrowing decisions.