The finance and credit has undergone a complete change over last few years. From being a process that would need maybe weeks to get a status update from bank to one that would take just a few clicks and a few minutes for the loan to get processed and disbursed, the accessibility to credit has become highly easy. While it is a boon for people who are in need of funds but it can also become a burden if not managed properly.
Many individuals unknowingly lead to clutter their financial life with multiple loans. This exposure to higher number of loans can potentially even lead a person into debt trap. At one point of time while the loan are able to bail one out at the time of financial need, it can also result in adversely impacting the credit profile and leaving one to look out for loan for low CIBIL score if funds were needed.
Before you apply for those multiple loans, please think about the following. These two basic rational will help you in taking the right decision.
The loan comes at a cost. Just because that new mobile phone or other gadget you intend to possess is up for grab though payment over next few months, do not get lured into the loan. Before signing on the loan form do ask yourself if you are in need of that loan. If you have funds then it would be a better idea to invest them into buying the product directly through complete payment in one go.
Apart from these there are bundled products. Like the banks extending life time free credit cards say along with car loans. Any additional card will add to the exposure and will put stress on your financial life.
This is where most of the individuals fail and feel stressed as the number of loans increase. Multiple credit facilities would come with multiple repayment dates. Any added activity adds to stress and requires time. With various due dates to be managed, the repayment will become a stressful task. Any misses on the obligation for any reason, maybe on account of ill health or travel etc, will rake in unnecessary pressure on you.
Another vital point that one generally tends to overlook is that an added loan repayment will reduce the monthly funds availability and hence can put pressure on your expense management.
One also needs to protect self against the exposure to credit. In that case, one would need to invest in insurance to protect against the perils of exposure.
Taking multiple loans would also mean that you would be exposing yourself to different kinds of products. It is important for you to be aware of the structure and requirements on each of these before actually you take them. Like a car loan is entirely different from a gadget loan. You will while be required to apply for transfer of vehicle in your name, the same is not applicable on the gadget loan. Also the interest structure and advance EMIs on the gadget loan makes it expensive.
In case this is already a case, then you must start working towards streamlining your credit exposure. Try to repay the high interest loans first. And even before than you must pay up the outstanding on the credit cards. In case of increase in income you should increase the EMI of the loans. This would facilitate early closure of loan and would also help in bringing down the cost.