Is It Possible to Take a Second Personal Loan While One Is Active?

When you reach a point in life where your finances are stable and you can support yourself comfortably, earning enough to meet your needs and responsibilities, you may wish to consider taking out another personal loan to renovate your home.

The convenience of a personal loan is unmatched, as funds are quickly accessible online for personal use as needed. Alternatively, if you face a situation that demands immediate funds, you might consider applying for a second personal loan to get through this challenging period. But is a personal loan only a one-time facility, or can we get multiple personal loans? Banks and NBFCS issue personal loans as per the individual policy. 

What is a Second/Parallel personal loan?

Customers who are actively repaying a HDFC Bank personal loan can apply for a second instant personal loan or switch to an alternative lender, such as ICICI Bank, for a new loan. The new loan will be granted independently of the existing one and will run in parallel with the existing one. Let us examine the eligibility criteria for obtaining an additional personal loan.

Vintage of the existing loan: If you have recently been granted a personal loan, allow some time before applying for a second loan. Banks generally do not grant two loans in quick succession, as they require time to track how the applicant manages the existing loan. Usually, Banks require the smooth repayment of 3 to 6 EMIs before granting a second personal loan.

Timely repayment track: Applying for a second personal loan from the same or an alternative bank? The repayment of your active personal loan must be made promptly, with no delays or bounced payments. Banks and NBFCs will consider granting you a second personal loan only if you can demonstrate that you are capable of managing the repayment of the credit taken.

The CIBIL score and repayment history of the existing loan: The applicant’s CIBIL score should be above the necessary benchmark. Each time an applicant applies for credit, their CIBIL score will be reviewed in relation to their CIBIL history. There must be no recent credit taken, and the number of CIBIL inquiries should be limited; otherwise, the applicant may be labelled as credit hungry.

The company category of the employer: If the applicant has changed jobs or is applying to an alternative lender for a second personal loan, a personal loan eligibility check must be carried out. The company where the applicant is currently employed must be listed on the Bank’s approved list of companies for the process to begin. 

If the company is listed as a Category A or B, the personal loan lowest interest rate will be offered.

Existing Obligations:  The existing obligations of the applicant, including credit card dues, are taken into account before approving a further amount as a second loan. It is a good idea to check the EMI applicable for the additional loan amount required. Use the personal loan EMI calculator to calculate the additional Emi for repayment of the second loan amount before applying. The total of all credit obligations should not exceed the allowed FOIR as per the HDFC Bank eligibility Criteria. In case your existing credit dues exceed the permitted percentage of your income, you have the option of going for a Personal loan Top Up.

What is a Personal Loan Top Up?

An individual with an existing loan can apply for funds when required as an addition or “Top Up”. A Top Up loan is an option to apply for a second or a new personal loan; both loan types serve the purpose of giving an applicant the surplus funds when required. 

What are the differences between a Top Up loan and a New or second loan?

Choice of lender: A personal loan holder can apply for a new loan with an alternate lender, which offers better terms. However, a Top-up is processed on the existing personal loan with the same lender.

A single Emi versus 2 Emi: With a personal loan top-up, the existing loan is merged with the additional amount approved. The repayment for the new loan is done via a single EMI. With a new loan, the applicant will pay an extra EMI based on the loan amount and applicable tenure.

Documentation: As the applicant has an existing relationship with the Bank, the documentation for funds issued as a personal loan top-up is minimal. In contrast, an applicant applying for a new personal loan has to submit their complete income and KYC documentation.

Interest Rates: Applicants can compare the offers of different lenders and negotiate for the lowest interest rates when applying for a second personal loan, but a top-up to the existing loan is issued at the current interest rate of the parent bank.

What is more beneficial, a second personal loan or a top-up personal loan?

The decision to apply for a new personal loan or opt for a top-up to an existing personal loan depends on the individual’s specific situation and requirements. Listed below are the circumstances that can influence the decision.

Urgent requirement for finance: If there is an emergency for funds, apply for instant personal loan online as a top-up. As the bank has an active personal loan account and the details of the applicant are verified, a top-up is a quicker solution for an urgent need.

Need for the maximum loan amount: A top-up personal loan is more effective for applicants who already have multiple credit lines and do not have sufficient financial eligibility for the required loan amount. With a top-up, the principal amount of the existing loan that has been repaid is deducted from the new personal loan. Thus, the eligibility for the top-up loan increases.

Foreclosure clause. Suppose funds are required for a limited period of time. In that case, a second loan works better, as the applicant can apply for a limited tenure for repayment or foreclose the loan after the minimum EMI have been paid.

Existing relationship with the lender: If the existing loan has a delayed repayment schedule, it is a good idea to apply for a second loan with an alternative lender to mitigate this.

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