FAQs

After completing his study of personal loans, Aman felt much more confident about the subject. He now understood how interest rates were calculated, how eligibility was assessed, what documents were required, how GST affected loan charges, and how personal loans compared with other borrowing options. Even so, a few practical questions still remained in his mind. What would happen if someone failed to repay a personal loan? Could a person take more than one personal loan at the same time? These were common doubts that many first-time borrowers shared. To clear his remaining confusion, Aman discussed these questions with his father, who explained the practical realities of borrowing responsibly. One of the most important questions every borrower should ask before taking a personal loan is **what happens if the loan is not repaid on time**. Personal loans are financial agreements between the borrower and the lender. Once the loan is sanctioned, the borrower is legally obligated to repay the principal along with the applicable interest through regular Equated Monthly Instalments (EMIs). Failing to meet these obligations can lead to several financial and legal consequences. The first consequence of missing an EMI is the imposition of **penal interest or late payment charges**. Banks and Non-Banking Financial Companies (NBFCs) generally levy an additional penalty whenever a scheduled EMI is not paid by the due date. This penalty is charged over and above the regular interest payable on the loan. As a result, delaying EMI payments increases the overall cost of borrowing and makes it more difficult for the borrower to clear the outstanding debt. Another significant consequence is the **negative impact on the borrower's CIBIL score**. Every loan repayment is reported to credit information companies as part of the borrower's credit history. When an EMI is missed or delayed, this information is recorded in the credit report. Since lenders rely heavily on the CIBIL score while evaluating future loan applications, repeated defaults can make it difficult to obtain new loans, credit cards, or favourable interest rates in the future. Aman was surprised to learn that even a few missed payments could affect financial opportunities for several years. His father explained that a poor repayment record creates the impression that the borrower may struggle to meet future financial commitments. Consequently, even if the borrower later improves their financial condition, rebuilding a damaged credit history may take considerable time. If the borrower continues to ignore repayment notices for an extended period, the lender may initiate **legal recovery proceedings**. Although personal loans are unsecured and do not involve collateral, lenders are still entitled to recover the outstanding amount through legal channels. Before initiating legal action, banks generally attempt to contact the borrower through reminders, phone calls, written notices, and settlement discussions. However, persistent non-payment may eventually lead to legal proceedings in accordance with the applicable laws and the terms of the loan agreement. For this reason, borrowers facing temporary financial difficulties should **communicate with the lender immediately** rather than simply missing EMIs. Many financial institutions are willing to discuss alternative repayment arrangements, revised schedules, or temporary solutions depending on the borrower's circumstances. Ignoring the problem usually worsens the situation, whereas timely communication may help both parties find a practical resolution. Aman then asked another common question: **Can a person have more than one personal loan at the same time?** His father explained that there is **no universal rule** that completely prohibits multiple personal loans. Whether another personal loan is approved depends entirely on the lender's internal policies and the applicant's financial profile. In many cases, **the same lender may not sanction multiple personal loans simultaneously** to the same customer. However, another bank or NBFC may consider the application if the borrower satisfies all eligibility requirements. Even then, approval is never automatic. The lender carefully evaluates the applicant's repayment capacity, existing EMIs, credit history, income, and overall financial obligations before making a decision. The most important factor in such situations is the borrower's **repayment capacity**. Every additional loan increases the monthly EMI burden. Before approving another loan, lenders calculate whether the applicant's income is sufficient to comfortably repay all existing and proposed obligations. If the combined EMIs become too high relative to the monthly income, the lender may reduce the loan amount or reject the application altogether. This is where the **Fixed Obligation to Income Ratio (FOIR)** becomes especially relevant. Since FOIR measures the proportion of monthly income already committed towards financial obligations, taking multiple loans increases this ratio. A very high FOIR indicates limited repayment capacity, making lenders more cautious while evaluating additional borrowing requests. Maintaining a **good CIBIL score** also becomes increasingly important when applying for multiple loans. Borrowers who have consistently repaid previous loans and credit card dues on time are more likely to receive favourable consideration than applicants with poor repayment histories. Responsible financial behaviour therefore remains one of the strongest factors supporting future borrowing opportunities. Aman also realised that **eligibility does not necessarily mean affordability**. Even if a lender approves another personal loan, the borrower should carefully evaluate whether taking on additional debt is financially sensible. Borrowing beyond one's repayment capacity may lead to unnecessary financial stress and increase the risk of missed EMIs. Another common misconception is that **taking multiple loans automatically improves one's credit history**. His father clarified that while successfully repaying different types of loans may contribute to a healthy credit profile, excessive borrowing can have the opposite effect. Too many active loans increase financial obligations and may lower the borrower's credit score if repayments become difficult to manage. Responsible borrowing therefore focuses on maintaining manageable debt rather than accumulating multiple credit facilities. Borrowers should also avoid applying for **the same loan from several lenders simultaneously**. Every formal loan enquiry is generally recorded in the applicant's credit history. If multiple lenders conduct credit enquiries within a short period, future lenders may interpret this as a sign that the borrower is urgently seeking credit, potentially affecting their assessment of the application. Before applying for another personal loan, borrowers should first consider whether existing loans can be managed more efficiently. For example, if several high-interest debts already exist, **debt consolidation** through a single personal loan may sometimes be a more practical solution than taking yet another loan. Simplifying repayments often improves financial discipline and reduces the overall burden of managing multiple EMIs. Aman also learned that personal loans should always be viewed as **tools for meeting genuine financial needs rather than sources of additional income**. Borrowing simply because credit is available may create unnecessary liabilities. Every loan should serve a meaningful purpose and fit comfortably within the borrower's long-term financial plan. After discussing these frequently asked questions, Aman realised that responsible borrowing extends far beyond obtaining loan approval. Timely EMI payments, maintaining a healthy credit score, avoiding unnecessary debt, and borrowing within one's financial capacity are essential habits that protect long-term financial stability. He understood that personal loans can be valuable financial tools when used wisely, but they also carry important responsibilities. By planning carefully, communicating openly with lenders whenever difficulties arise, and managing repayments with discipline, borrowers can use personal loans to achieve their financial goals without creating avoidable financial stress in the future.