Personal loans: How opting for multiple funding options can be a rational move? | Mint

If you are suddenly short of funds, you should remember that you can always raise a personal loan to meet your demands. Instead of personal loan, you can also raise funds through an array of sources such as credit card and instant loan.

For instance, you feel the need of ₹7.5 lakh all of a sudden then there are several options to go for it. First of all, you can raise the money through personal loan. Second, you can use multiple channels such as credit card, instant loan and personal loan.

There could be ₹3 lakh as personal loan, ₹2 lakh through instant loan and the rest of the payment (to vendors) can be made via a credit card. This can even help you maintain a good credit score.

These are some of the benefits of opting for multiple options for meeting your financial needs.

Benefits of opting for multiple funding options

1. Smaller amounts can be handled easily instead of one large loan.

2. Personal loans carry high rate of interest. So, it is advisable to keep the interest burden as low as possible.

3. When you make payment through credit card, you use some of the limit of credit card, which is good for credit score as long as the CUR (credit utilisation ratio) doesn’t cross its ideal ratio.

4. Additionally, there could be some pre approved instant loan options offered by your bank via net banking. It doesn’t harm to take personal loan in conjunction with a pre-approved loan.

Exercise caution

It is, meanwhile, important to remember that seeking multiple loans through multiple channels may lead to several hard inquiries, thus bringing your credit score down.

So, combining multiple options is advisable only when the other options are pre-approved (Insta loan and credit against credit card) and not have to be applied for.

Meanwhile if you opt for one personal loan, it has its own set of advantages.

Advantages of using only personal loan

Single inquiry: A personal loan requires only one hard inquiry, thus restricting the impact on your credit score.

Structured repayment: In case of one personal loan, you will have fixed installments and a clear timeline to help you manage payments better.

Lower utilisation: By refraining from using your credit cards, you keep it available for other uses, thus keeping utilisation low.

Additionally, a personal loan reflects marginally positive on your credit score. It is small but relevant factor in credit score.