In today’s digital lending era, getting instant loans has become easier than ever. With just a few taps, borrowers can take ₹10,000–₹50,000 loans from multiple apps, BNPL services, or credit lines.
While it may feel convenient, this pattern—called loan stacking—is a silent financial threat.
Loan stacking happens when a borrower takes several loans at the same time or within short intervals, often to manage cash flow gaps.
But the hidden consequences can be severe, leading to CIBIL score damage, high interest burden, and even legal trouble.
What Is Loan Stacking?
Loan stacking means:
Taking multiple small loans from different lenders
Often within days or weeks
Without the lenders knowing about each other
Borrowers stack loans to pay bills, emergencies, or even to repay older loans.
But lenders see this as a high-risk behavior.
Why People Fall Into Loan Stacking
✔ Easy approval from digital lending apps
Most apps approve loans without heavy documentation.
✔ Small ticket size feels harmless
“It's just ₹20,000, I can repay easily.”
✔ Urgent need for money
Medical emergencies, job loss, or cash shortages.
✔ Borrowing to repay older loans
A major warning sign of a debt spiral.
The Hidden Dangers of Loan Stacking
1️⃣ CIBIL Score Drops Quickly
Every new loan creates:
A hard inquiry
A higher credit exposure
Multiple inquiries in a short time reduce your CIBIL score drastically.
2️⃣ Debt Becomes Unmanageable
Even small EMIs (₹1,000–₹3,000 each) add up.
Example:
5 small loans × ₹2,000 EMI each = ₹10,000 extra monthly burden.
3️⃣ High Interest Rates & Penalties
Digital lenders charge:
24%–36% annual interest
Heavy late fees
Daily penalty charges
Stacking magnifies these costs.
4️⃣ Lenders Flag You as High-Risk
If lenders detect stacking through credit checks, they may:
Reject future loans
Reduce eligibility
Increase interest rates
5️⃣ Debt Trap Risk
Borrowing to repay another loan =
Financial red zone.
It can lead to:
Continuous borrowing
Missed payments
Default
Collection harassment
6️⃣ Legal & Collection Issues
Defaults invite:
Aggressive recovery calls
Legal notices
Permanent credit score damage
Signs You’re Falling Into Loan Stacking
You have more than 2–3 active small loans
You borrow from one app to repay another
Your EMI dates overlap
You’re constantly checking loan apps for offers
Your CIBIL score drops suddenly
These signs mean you need to stop immediately.
How to Avoid Loan Stacking
✔ Borrow only when absolutely necessary
✔ Keep only 1 active loan at a time
✔ Track all your EMIs in one place
✔ Create an emergency fund
✔ Avoid impulse digital loans
✔ Don’t use BNPL as a backup loan
✔ Close old loans before taking new ones
✔ Start budgeting to reduce spending
What to Do If You Already Stacked Loans
1. Consolidate Debt
Take one lower-interest personal loan to close multiple high-interest loans.
2. Contact lenders
Negotiate:
Extensions
Settlements
Revised EMIs
3. Prioritize repayments
Clear the costliest loan first.
4. Stop applying for new loans
Avoid further score damage.
5. Build a repayment plan
A structured plan helps regain control.
❓ FAQs
1. Is loan stacking illegal?
Not illegal, but extremely risky and frowned upon by lenders.
2. Does loan stacking affect CIBIL score?
Yes — multiple inquiries and high debt levels drop your score quickly.
3. Why do lenders dislike loan stacking?
Because it signals high default risk.
4. How many small loans are safe at a time?
Ideally only one.
5. Can loan stacking lead to a debt trap?
Yes, it is one of the fastest ways to fall into a debt spiral.
Published on : 20th November
Published by : SMITA
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