You can take out as many additional personal loans as lenders are willing to offer you if you already have one. Lenders typically have individual policies limiting the number of loans and total amount they will allow you to borrow, even though there are no laws prohibiting the number of loans you can have at once.
There are downsides to taking on more than one personal loan, even beyond the additional monthly payment. Depending on your situation, you may qualify for better, less expensive alternatives to borrow the money you need.
In the realm of personal finance, the question of whether or not you can apply for a loan twice is a common one. The answer, as with many things in life, is a bit nuanced. While there are no federal regulations explicitly prohibiting borrowers from taking out multiple personal loans, there are certain factors that can influence your eligibility and the overall feasibility of such a move.
This guide delves into the intricacies of multiple personal loans, providing you with the knowledge you need to make informed decisions about your financial future
Understanding the Landscape: Borrowing Limits and Lender Policies
It’s important to note that there are no hard and fast rules regarding the number of personal loans you can have However, individual lenders often impose their own borrowing limits, which can vary significantly. Some lenders may allow you to have multiple loans simultaneously, while others may restrict you to a single active loan at a time
For example, SoFi allows borrowers to have up to two personal loans, but LendingClub does not set a cap. But it’s important to keep in mind that even if a lender permits multiple loans, they might have a maximum amount that you can borrow in total for all of your loans.
The Impact of Debt-to-Income Ratio and Credit Score
It’s critical to comprehend the implications of your debt-to-income ratio (DTI) and credit score when thinking about taking out a second personal loan. Your DTI represents the percentage of your income that goes towards debt payments. Lenders typically prefer borrowers with a DTI of 40% or lower. Taking out a second loan could increase your debt-to-income ratio (DTI) above the threshold if you already have a lot of debt, which could prevent you from being approved for another loan.
Similarly your credit score plays a vital role in your loan eligibility. A high credit score indicates a lower risk to lenders, making you more likely to be approved for a loan with favorable terms. However, if your credit score has taken a hit since your first loan, you may face higher interest rates or even rejection for a second loan.
Exploring Alternatives to Multiple Personal Loans
It’s a good idea to look into other options that might better fit your financial situation before taking out another personal loan.
Buy Now, Pay Later: This increasingly popular option allows you to spread the cost of a purchase over several installments, often without incurring interest or fees. However, it’s crucial to exercise caution with buy now, pay later plans, as the convenience can easily lead to overspending.
0% APR Credit Cards: If you boast a stellar credit score (typically 690 or above), you might qualify for a 0% APR credit card. This can be a fantastic way to finance a large expense interest-free for a limited period, usually 18 to 21 months. Just be sure to pay off the balance before the introductory period ends to avoid accruing interest charges.
Cash Advance Apps: By providing small advances on your paycheck, these apps offer a quick and easy way to cover unforeseen expenses. Usually, they charge a subscription fee or an optional tip for the service in place of interest. Funding typically takes one to three days, but for an extra charge, you can occasionally get funding right away.
Medical Payment Plans: Many healthcare providers offer payment plans to help patients manage the cost of treatment. Additionally, some providers offer medical credit cards specifically designed for costly procedures.
Home Equity Line of Credit (HELOC): Homeowners can consider a HELOC to finance significant expenses like home renovations. With a HELOC, you draw on a credit line as needed, paying interest only on the amount you borrow. This structure offers a longer draw period (typically 10 years) followed by a repayment period (usually 20 years), making it ideal for expenses with potential cost fluctuations.
Increasing Your Income: Looking into methods to raise your income might be a good idea if the expense you’re thinking about can wait, especially if it’s discretionary. This can lower your current loan balance and raise your DTI, which will increase your appeal as a borrower when you apply for a second loan down the road.
The Bottom Line: Weighing the Pros and Cons
In the end, your unique situation will determine whether or not you should apply for a second personal loan. Analyze the benefits and drawbacks carefully, taking into account your credit history, financial situation, and the loan’s intended use. If you choose to apply for a second loan, make sure to compare rates and terms offered by several lenders.
Remember, responsible borrowing is key to maintaining financial stability. By making informed decisions and exploring alternative options, you can navigate the world of personal loans with confidence and achieve your financial goals.
Are personal loans bad?
Personal loans can be useful, but there are downsides to consider before taking on more debt. Here are some of the drawbacks of having more than one loan at a time:
- Impact to credit from hard credit inquiry. The lender will perform a hard credit pull on your account each time you apply for a loan or credit card. Your FICO score declines as a result of hard pulls, usually by 5 points or less. The two-year period that the hard pull stays on your credit report
- Higher DTI ratio. The ratio of your debt to income will increase each time you take on new debt. If your debt-to-income ratio is high, you might not be able to get approved for other loans, such as mortgages. If you are approved for a loan, your annual percentage rate (APR) will probably be high because lenders also use your DTI ratio to set interest rates. This will increase the cost of loan repayment over time.
- Higher interest rates on new loans. Any outstanding personal loans indicate that the interest rate you pay on a new loan will probably be higher because lenders use your debt-to-income ratio to calculate your annual percentage rate (APR).
- Additional monthly payment. You should use a personal loan calculator to see if you can afford the additional monthly payment that you will be making.
How many loans can you have?
You can have as many loans as lenders will approve for you, but there are practical limitations. The more personal loans you have, the harder it will be to qualify for another loan. Every time you take out a loan, you’ll increase your debt-to-income (DTI) ratio. Individuals with good credit and low debt-to-income ratios have a higher chance of having their applications approved by lenders; additionally, many lenders have maximum loan amounts and limits for any one borrower.
Can I Get an FHA Loan Twice
FAQ
How long do I have to wait to apply for a loan again?
How long after getting a loan can I apply for another?
Can I apply for a loan again after being denied?
How often can I apply for a loan?
Can I have more than one personal loan?
You can have more than one personal loan with some lenders or multiple personal loans across different lenders. Some lenders have a maximum number of loans you can have with them, a maximum amount you can borrow or both.
Can you open multiple personal loans at the same time?
Some lenders might allow you to open more than one personal loan account with them at the same time. So, while there is no industry-wide rule that says whether you can have multiple personal loans, don’t be shocked if a particular lender has its own policy on the matter.
Can I take out more than one loan?
Yes. Many banks and lenders will allow you to take out more than one loan, but they typically have limits. These are a few lenders that cap the number of loans or amount of money you can borrow. Be sure to check the fine print or ask a lender directly if they aren’t on this list and you want to know their limits.
Can I get a personal loan if I have multiple accounts?
Some may not approve you for a personal loan if you have another one outstanding. Others might be fine with multiple personal loans, as long as they don’t have another with the same lender. Some lenders might allow you to open more than one personal loan account with them at the same time.