You have taken a personal loan for your lavish wedding already, however, that was before you came across your dream wedding outfit. You have got finance for renovating your house; however, that was prior to finding those perfect tiles for your bathroom.
A second loan may come in handy when you have underestimated costs for a huge purchase, an event, or any other expense.
This loan can be more expensive & riskier than the first personal loan in UAE.
Can I Take More than One Personal Loan at a Time?
Yes. Most of the lenders in the UAE give you an option of taking more than one loan when you have made payment for the part of the initial balance. Through this, you have established a history of making repayments on time.
However, it is not a good option in every situation.
For instance, you may not obtain the best deal. Lenders are the one who decides the amount of loan you can borrow, your APR, and the loan term depending upon the debt-to-income (DTI) ratio and credit score. If you have taken out a personal loan in Dubai recently, there could be a hit on your credit score after a hard credit check. This can turn out to be a risk for you.
The debt you have recently taken on also raises your DTI, which is considered by the lenders to check your ability to repay a loan. Just as a low credit score, higher DTI of the borrower is considered risky. With high DTI, you may have to face trouble in getting approval for the loan with a competitive rate of interest.
Things to Consider Before Obtaining another Loan
Here are a few things you need to consider before you opt for more than one personal loan in UAE. Check this to compare personal loan Interest rate to find the best personal loans.
- You may face trouble when you want to borrow in the future. Obtaining a debt could have a good impact on your credit if it is done in moderation. However, it won’t look good while you apply for a loan but are on the hook for various debts or have a lot of inquiries on your credit report.
- It may not be the exact financial assistance you need. Read here to know how. Taking out on personal loans regularly for covering everyday expenses can be an indicator showing that you are stuck in a debt cycle.
- Your monthly debt will also increase. Multiple loans lead to multiple repayments every month. The lenders won’t usually give approval for a loan you cannot afford. In case your financial condition changes, it can be more difficult to make these repayments if you opted for a bigger loan with a longer tenure.
- Your understanding of these loans. If you consider taking multiple loans in the UAE, you should first familiarize yourself with the varying options you are looking into.
- Your motivation should be correct. Before you apply for multiple personal loans in Dubai, ask yourself if you are able to resist your urge to borrow for things that are not essential. You should make sure that you are opting for a loan for the right purpose.
- You can serve all those debts or not. Make sure that you have the resources needed to keep all those debts in good standing. Even if there is a “maybe” in your mind, let alone a “no”, you could be walking into risk.
- You need that personal financing or not. First of all, you need to evaluate your present financial situation honestly. Check if it is actually important to juggle with multiple loans simultaneously, or you can manage with a single loan.
What Happens When You Apply for Multiple Loans at a Time?
When you apply for multiple loans at one time, this could harm your credit score. However, the damage caused is based on how far you have reached in your application process, the loan type, and the amount of time you let pass amongst applications.
If you are only interested in comparing rates, you can check the website of the lender for getting an idea of the kind of loan you may get. You can use the personal loan calculator for more details. This will not affect your credit score also. If you actually apply for multiple personal loans, you will have to go through a hard credit check, which may damage your credit temporarily.
When you apply for roughly the same amount of loan with almost similar lenders, the credit bureaus usually recognize that you are looking for the best rate and not really trying to buy multiple loans. In this case, your hard inquiry would not appear on your credit report instantly. Hence, this allows you to find multiple loans having your original credit rating.
When does it Make Sense to go for Multiple Loans?
We all know that capital requirements are difficult to predict. Sometimes unexpected opportunities come up, and unfortunately, a disaster may strike. Here are the pros of having multiple loans in such situations.
- Speedy responses
Having instant access to multiple sources of credit may give you a lot of flexibility in case of any unforeseen crisis.
- Improvement of Credit
In the case of business, operating without a personal loan in Dubai makes the functions of the business more expensive, which may have a devastating impact on the efforts of staying competitive. Improving the credit of the business is usually a long process. Opting for multiple loans can help in speeding up this process. By making repayments timely and consistently, you may be able to improve your credit score which may help you getting debts in the future too.
- Flexible Financing
The strategy of making a balance between multiple sources of funds helps in giving you access to a revolving loan. You may also stagger the payment of your debts, which gives you greater flexibility.
- Security and Safety
Having more than one source of funds in play at a time may offer you a security measure. With the funds available easily, you can sense a bit of safety as you know you have additional funds available if or when you need them.
The Bottom Line!
It is possible to opt for more than one loan at a time. But this could increase your debt-to-income (DTI) ratio or negatively impact your credit score. This can make it hard for you to qualify for competitive interest rates in the future. Too much borrowing may make your monthly payments unaffordable and lead to a debt cycle.
However, this does not mean that going for more than one personal loan is always a bad idea. If you end up needing more money than you anticipated originally, then you may think of taking more debt. If you have paid off some part of your original loan, you can go for a second loan if needed. Compare lenders and their rates, only then go for a personal loan in UAE.