How Many Personal Loans Can You Have at Once?

Personal loans allow you to borrow money for almost any purpose, from consolidating debt to financing a large purchase. While there’s no set limit on the number of personal loans you can have at the same time taking on multiple loans requires careful consideration.

Is There a Limit on Personal Loans You Can Have?

There’s no legal limit to how many personal loans you can have concurrently Lenders want to ensure you have the capacity to take on additional debt, so they may restrict lending based on your

• Credit score: Most lenders require a minimum credit score, often 640 or higher. Multiple loan inquiries and new accounts can lower your score.

• Income: Lenders verify you have enough income to manage new loan payments. Additional debt reduces your disposable income.

• Debt-to-income ratio: Your DTI compares your monthly debt payments to gross monthly income. Most lenders cap DTIs around 50%. More loans increase your DTI.

So while you can technically have unlimited personal loans, lender criteria limits how much you can realistically borrow.

When Might Multiple Personal Loans Make Sense?

Although not ideal, certain circumstances may justify taking out more than one personal loan:

• Temporary expenses: A personal loan can cover a one-time cost, like medical bills or moving expenses, when you don’t have savings.

• Separate needs: You may take out a loan for one purpose, then require another for something unrelated. For example, borrowing initially to consolidate credit card debt, then later to finance a home improvement project.

• Urgent needs: An emergency might come up after you’ve already borrowed. Needing fast cash due to job loss or a health crisis could warrant an additional loan.

• Lower rates: You may get a better rate with a new lender, and refinance existing loans to save money.

• Access more funds: If you’ve maxed out borrowing with one lender, another may extend you additional credit.

• Improve credit mix: Having both installment (fixed payments) and revolving (variable payments, like credit cards) accounts can help your credit score.

How Lenders View Existing Personal Loans

When assessing a loan application, lenders examine your liabilities, including personal loans with other providers. Too many outstanding loans may make lenders view you as higher risk.

Lenders want to see that your income sufficiently covers existing obligations as well as new debt. If your DTI is too high, they may deny additional borrowing.

Too many recent credit inquiries from loan applications can also diminish your creditworthiness. Every application triggers a hard inquiry, which remains on your credit report for two years.

Getting Multiple Loans Through One Lender

Some lenders allow existing customers in good standing to take out additional loans. This has advantages:

• Fewer inquiries: No new application means no additional credit checks.

• Higher approval odds: Familiarity with your history may increase willingness to lend.

• Potentially better rates: Loyal customers may get lower rates than new applicants.

• Consolidation options: Lenders may allow refinancing existing loans into one bigger loan.

However, lenders still limit how much you can owe overall based on your income, credit score and DTI. Defaulting on a loan with a lender will likely bar you from additional borrowing there.

Impact on Credit Score

When managed prudently, personal loans can improve your credit mix. But in excess, the impact on your score turns negative:

• Inquiries: Each application prompts a hard inquiry, which can lower scores, especially with numerous recent checks.

• New accounts: Too many new accounts in a short timeframe can decrease your score.

• Utilization: More loans drive up total balances owed, increasing credit utilization ratios. High utilization lowers scores.

• Missed payments: Defaulting on any loan damages your score. Multiple loans mean more potential for late payments.

Alternatives to Multiple Personal Loans

Rather than pile on personal loans, consider these options:

• Credit cards: Balance transfer or low-interest cards allow interest-free financing for a period.

• 401(k) loan: You can borrow from your own retirement savings and repay yourself with interest.

• Home equity loan/line of credit: Tap available equity in your home. Rates are often lower than personal loans.

• Cash-out mortgage refinance: Refinancing pulls equity out of your home to use as cash.

• Life insurance loan: Some policies allow you to borrow against their value.

• Family loan: Borrow from relatives with clear terms and timeline for repayment.

The Bottom Line

Personal loans can provide accessible financing for your needs. But carefully weigh the impacts of taking on multiple loans. Establish a realistic borrowing limit for yourself based on affordability. Explore alternatives that may offer lower rates without further damaging your credit. With prudent use, personal loans remain a flexible financing option when used properly.