How Many Personal Loans Can You Have At Once?
The flexible nature of a personal loan makes it a useful option to pay for big purchases, consolidate debt or cover unexpected bills. If you already have one personal loan and are still in need of cash, you might even wonder if getting a second, or perhaps a third, personal loan is possible.
Let’s explore how many personal loans you can have at once and the advantages and risks associated with seeking out multiple personal loans.
Can You Have More Than 1 Personal Loan?
No rules explicitly prohibit a borrower from taking out multiple personal loans. In many cases, people can be approved for more than one personal loan within a short time frame.
Ultimately, though, it boils down to your lender’s policies and the nature of your financial needs and financial profile.
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Factors That Impact How Much You Can Borrow
The number of personal loans you can take out and the total amount you can borrow at any given time vary based on your unique situation. Below are some factors that come into play when you essentially apply for multiple personal loans at once or, more specifically, seek an additional loan not all that long after being approved for a loan and collecting the cash.
- Lender rules: Some lenders limit how many loans you can take out through their organization. While such a restriction might prevent you from getting two or more personal loans through the same lender, it doesn’t necessarily mean you won’t be able to find another lender willing to approve you for your personal loan.
- Loan amount: Even if a lender lets you take out multiple personal loans within a relatively short period of time, it’s possible you’ll encounter an aggregate loan cap. For example, you might not be able to borrow more than a total of $100,000 across multiple loans from the same lender.
- Debt-to-income ratio (DTI): Most lenders consider your DTI, which represents your total monthly debt payments compared to your gross monthly income. In general, lenders prefer to work with borrowers who boast a DTI of no more than around 40%, but some lenders demand a lower DTI while others allow for a DTI even higher than 40%.
- Credit score: Lenders in most cases prefer to work with borrowers who have a good or excellent credit score. If you’ve managed your current and past loans responsibly, your credit history should reflect that.
Lenders consider numerous factors when reviewing an application for a personal loan. If your finances can support another loan and a new loan won’t violate the lender’s policies, you might be approved for several personal loans and be paying on several personal loans at once.
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Advantages Of Having Multiple Personal Loans
If you’re okay with juggling multiple personal loans rather than dealing with just one at a time, it’s important to remember that this financial decision will have both advantages and disadvantages.
The main advantage of taking out multiple personal loans is that you’ll have more funds to cover a variety of financial needs. For example, you might use one personal loan to fund moving costs while you use a second or third loan to cover wedding expenses or a home renovation project.
Additionally, personal loans tend to have lower interest rates than some other sources of money, including credit cards.
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Risks Of Having Multiple Personal Loans
The downsides of having multiple personal loans are pretty straightforward and include:
- A bigger credit hit: Every time you apply for a new loan, you’ll likely see your credit score drop by a few points. The good news is that with consistent, on-time payments on each outstanding loan balance, your credit score should recover fairly quickly.
- More monthly payments: Adding another personal loan payment to your monthly budget could put significant stress on your finances.
How To Qualify For Multiple Personal Loans
If you want to qualify for another personal loan before you’ve paid off the balance on your previous loan, start by reflecting on the previous loan application you submitted. As was true before, the lender will ask for details about your financial situation before deciding whether to approve your loan request.
Lenders almost always prefer to work with borrowers who have a good or excellent credit score, but it’s possible to find different lenders willing to work with bad-credit borrowers. It’s best to take a close look at your credit score and do some research to determine which lenders might be willing to work with you.
Beyond a good credit score, you’ll need to provide proof of income – typically through bank statements or pay stubs.
If you already have a personal loan, your DTI is likely a bit higher than the last time you applied. Unfortunately, this likely means you’ll face a higher interest rate attached to your personal loan this time around.
Should You Get Multiple Personal Loans?
Whether you should get multiple personal loans will largely depend on your unique situation.
Taking on more debt isn’t usually the wisest course of action. But, if you have a history of managing personal loans responsibly, applying for another personal loan to cover an unavoidable expense could be the answer.
However, if you have a history of leaning on personal loans to cover the gap between your income and expenses, another personal loan likely won’t solve the bigger problem. For borrowers looking to get another loan to cover everyday expenses, it’s worth taking a closer look at your spending before turning in a loan application. If you’re honest about what you can afford to spend, you might opt to hold off on pursuing another loan for now.
Finally, it’s also likely worth considering other borrowing options to make sure you’re going down the most affordable path. If you can find a cheaper way to borrow money, that’s probably the pathway to pursue.
Alternatives To Personal Loans
If a personal loan isn’t the right fit for you and your situation, you may find another option to be the way to go – rather than simply abandoning your pursuit of funding. Here are several common alternatives to personal loans:
- Credit cards: If you have a credit card in your wallet, you can use it to purchase up to the amount of your credit limit. The downside is that credit cards have notoriously high interest rates. But, if you find a credit card with an introductory interest rate of 0%, you may be able to pay off any purchases without paying interest.
- Buy now, pay later (BNPL): BNPL services let you break up purchases into a series of installments. In some cases, BNPL services come with no interest or fees. BNPL services are a useful way to lock in a payment plan without a personal loan.
- Medical payment plans: If you’re trying to secure a personal loan for medical costs, it’s best to reach out to your medical provider first. You may be able to lock in a payment plan directly with them.
- Home equity line of credit (HELOC): If you’re a homeowner with significant equity in your house, you might be able to tap into that equity to access any funds you need. A HELOC functions similarly to a credit card as it comes with a credit limit, meaning you can tap into the funds on an as-needed basis and avoid overborrowing.
- Home equity loan: In general, home equity loans come with lower interest rates than personal loans. But, as with a HELOC, you’ll be using your home as collateral that you risk losing if you can’t keep up with the new payments. Both home equity loans and HELOCs are second mortgages that you’ll pay in addition to the primary mortgage on your home.
The Bottom Line
Having more than one personal loan will provide you with more money to put toward a purchase or debt payment of your choosing. Or you may use the funds to consolidate debt.
But even though there’s a strong possibility you can have more than one personal loan if your finances are in order, it’s still not a bad idea to explore your other options. For example, homeowners can sometimes access the funds they need by tapping into their home equity.
