Education loans have made premium higher education affordable for thousands of Indian students. However, studying while living abroad can be costly. In such a scenario, it makes sense to take a personal loan for living expenses in addition to an existing education loan.

Now, in theory, you can apply for a second loan if necessary. But while making your decision, there are some aspects you should carefully consider. 

Decide the purpose of your loan

Before you apply for a second loan, carefully plan how you will use the borrowed funds. Pen down your short-term expenses, such as rent and commute charges, and then decide how much money you require. You must eventually be able to pay off the amount you borrowed, in addition to your existing loan. Once you have decided your loan amount and tenure, use a personal loan EMI calculator to estimate the EMI amount you can pay comfortably.  

Research before approaching lenders 

Yes, it is possible to borrow two loans simultaneously from the same financial institution. All you need to do is approach your existing lender and explain why you need a second loan.

However, some lenders may decline your application for another loan after assessing your credit history and personal loan repayment capacity.  In such cases, approach a different lender, and choose either one of these options –

• Request a fresh loan
• Transfer your education loan to the new lender and then apply for personal finance with them. You might have to incur some minor loan transfer charges in this case.
• If the above options fail, first repay your education loan, get a NOC certificate from the lender, and then apply for a second loan with the new lender.  

Application procedure

Since your existing lender has all your verified details, you can avoid a lot of paperwork and documentation for a second loan. But if you choose a new lender or transfer your loan, you will have to resubmit all the mandated documents, and sign an affidavit stating other debt obligations. Not to mention, if you provide incorrect or incomplete information, your application for a second loan might not be approved.

To improve your personal loan eligibility, therefore, you must have a low FOIR (fixed obligations to income ratio) and a high credit score. The FOIR is a measure of your repayment capacity. Ideally, only 40% to 50% of your monthly income should go towards repayments.

To sum up 

Taking on more than one loan will require careful management on your part. Otherwise, it can lead to poor financial health. So, remember to be cautious and perform a thorough assessment of your finances and needs before applying for a personal and education loan simultaneously.

Also, make sure to shop around the loan market to find financial institutions offering affordable personal loan interest rates, so you can repay the debt conveniently.