Should you Apply for Personal Loan at Multiple Banks?
Personal Loans are taken for various reasons, including big events like family weddings and vacations or financial problems like overdue credit card payments. Since many people do not fully understand the world of finance, they tend to opt for what seems like the easiest path. When short on funds, people apply for multiple Personal Loans at different financial institutions. They think that this increases their chances of approval. Unfortunately, this isn’t as simple as it sounds and any loan applicant should spend a few minutes to understand the advantages and disadvantages of taking Personal Loans at multiple banks.
What are the Pros?
If luck is on your side, you may find that more than one institution has approved your loan. This essentially means that you may now have more funds than you require. This will certainly help ease your financial burden. However, this is an exceptionally optimistic scenario, so don’t keep your hopes too high!
What are the Cons?
Nowadays, financial institutions look at your Credit Information Bureau India Limited (CIBIL) score as part of their background check. If you apply to multiple lenders, then this reflects on your credit history. Financial firms may be reluctant to give money to such individuals, as they appear to be credit hungry on unsecured products.
Additionally, even if one lender rejects your application, it will have a negative impact on your CIBIL score. Seeing this, other lenders may also reject your application. In short, you might end up with multiple negative markings.
If you are a first time borrower, then your CIBIL score stands at 0. Rejections will not only take your score to negative, it will also make it extremely difficult for you to get any loans in the future.
If you are lucky enough to secure loans even with a bad CIBIL score, know that your Personal Loan interest rates in India, in all likelihood, will rise drastically.
So What is the Solution?
As you have probably noticed, there is only one pro listed in this article. Hence, it is pretty clear that the disadvantages outweigh the one advantage in large measure.
In today’s world, you can simply sit at home and apply for a Personal Loan. Just because the application process is easy, don’t submit all the Documents Required for a Personal Loan simultaneously to multiple companies.
It is important to first explore all possibilities, before taking any action. So collect information from different lenders, understand their terms and conditions, and narrow down on the one with the lowest fees and charges. After you make a final decision, apply to the institution that best suits your needs and gives you the best deal. Be smart! In the hurry to secure funds for the present, don’t end up creating financial obstacles for the future.