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5 smart tips to effectively manage multiple loan accounts

It isn’t uncommon for people to have multiple credit accounts to their name. As a matter of fact, a large number of families that have a home loan also have a car loan or a vehicle loan. While these loans are secured, personal loans aren’t. This means they do not require collateral. Personal loans have higher interest rates in comparison to secured loans, but come with flexible repayment tenures and attract significantly lower interest rates than credit cards. The market today has a multitude of lenders offering personal loans at varied interest rates and competing offers, enabling individuals to get a super-easy and instant access to credit.

If you have multiple personal loan accounts, it doesn’t necessarily mean you’re going to get submerged in debt. With effective management, you can prevent debt from spiralling out of control, while also gradually coming out of it. Let’s look at some proven tips to manage multiple personal loan accounts.

1. Pay off personal loan EMIs before your monthly credit card dues

It is advisable to clear your monthly repayment amount on your personal loan account before your credit card account – this is because defaults and late payments on personal loans impact your credit score more than defaults/late payments on credit cards. As such, defaults on personal loans can be quite severe, having the potential to reduce your score by a whopping 50 points. When you have multiple loan accounts, you’re often going to find yourself falling short of funds. In a scenario like this, it is important that you prioritize your payments accordingly.

2. Don’t create additional credit card debt

The importance of this point cannot for once be understated. If you go on to create additional credit card debt despite having multiple loan accounts, you’re staring at danger in the face, without quite being prepared to take it down. Credit card interest rates hover at about 35-40% p.a. So accumulating more credit card debt will force you to make higher minimum payments, leaving you with little in your pocket for the given month.

3. Focus on pre-closing one loan at a time

Now this will solely depend on the number of loan accounts that you have. If you have 2, you can manage to pre-close one of your loan accounts in a few months, but if you have 3, it might be one too many. While you focus on pre-closing, make sure you pre-close the account with the highest interest rate first and choose to pre-close your loan accounts before your credit card accounts.

4. Opt for a balance transfer or a debt consolidation loan

The best way to get rid of debt from multiple sources is to get a debt consolidation loan and direct all debt towards a single source. Not all banks will offer you a debt consolidation loan and in order to get one, you should have a good repayment history and a high credit score. Debt consolidation loans usually come with slightly higher rates of interest than personal loans. It is mostly top private banks that offer debt consolidation loans. So, check with your bank if they can provide you with one. Banks usually look at a spate of parameters, including the employment stability, length of credit history and the relationship with the bank, while approving a debt consolidation loan.

5. Don’t choose to take small loans to manage monthly repayments

You might be tempted to take a small loan to pay off your monthly repayment amount on one or more of your loans, but don’t do it. Clear your dues first before prioritizing your spending on other aspects. Applying for additional loans will impact your credit score as an increased number of “hard pulls” lead to rejections, which then go on to negatively impact your credit score, prompting more rejections in the future.

(By Aditya Kumar, Founder & CEO,

Source: Financial Express