With rising expenses and growing financial needs, many borrowers in India often find themselves needing a second loan — even while they're still repaying an existing EMI. But banks don’t hand out second loans blindly.
Here’s a breakdown of what lenders assess before approving your next loan and how you can improve your chances.
1. Debt-to-Income (DTI) Ratio
This is the most critical factor.
Formula:
Total EMIs / Monthly Net Income
Lenders usually want your total EMIs (including the new loan) to stay below 40-50% of your take-home salary.
Example:
If your salary is ₹60,000 and you're already paying ₹15,000 EMI, adding another ₹20,000 EMI will push your DTI to 58%, which is risky.
2. Credit Score
Your CIBIL score must ideally be above 700. If you’ve taken loans before and paid them on time, you’re more likely to be trusted with a second loan.
Red flag for lenders:
Late payments on existing EMI
High credit utilization on credit cards
Recent loan settlements or defaults
3. Existing Loan Type
If your current loan is secured (like a home or car loan), lenders may still consider a second unsecured loan (like a personal loan).
But if your existing loan is unsecured, adding another unsecured loan could raise eyebrows unless your income has recently increased.
4. Employment and Income Stability
Lenders will verify:
Length of your current job
Nature of employment (salaried vs self-employed)
Frequent job changes or gaps may reduce your loan chances
Pro Tip:
Submit the latest salary slips, Form 16, and bank statements to strengthen your case.
5. Loan Purpose
The reason for your second loan matters:
Education, medical emergencies, or home renovation are considered genuine needs
Loans for speculative investments (stocks/crypto) may be seen as risky
6. Existing Repayment History
Your past repayment behavior is a strong indicator:
100% on-time EMIs? Good news.
Any bounce or cheque return? That stays in your record and hurts eligibility.
How to Improve Your Chances for a Second Loan
Prepay part of your existing loan to reduce your DTI ratio
Choose a longer tenure for the second loan to reduce EMI
Apply for a smaller loan amount
Maintain a credit utilization ratio under 30%
Add a co-applicant if possible to boost income eligibility
Common Mistake: Applying to Multiple Lenders at Once
Avoid submitting applications to 5–6 lenders at the same time — each hard inquiry hurts your credit score. Instead, use pre-approved offers or a loan comparison platform to check eligibility first.
FAQs
Q1: Can I take a personal loan if I’m already repaying a home loan?
Yes, if your debt-to-income ratio and credit score are within acceptable limits.
Q2: Will my credit score drop if I take a second loan?
It may drop temporarily due to a hard inquiry, but regular repayment boosts it over time.
Q3: Should I take a top-up loan instead?
Top-up loans on existing home or personal loans may offer lower interest rates and simpler processing.
Published on : 2nd August
Published by : SMITA
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