Table of Contents
- Can You Have More Than One Personal Loan at Once?
- Does It Ever Make Sense to Have Multiple Loans?
- Pros and Cons of Taking Out Multiple Personal Loans
- Ways Multiple Personal Loans Can Affect Your Credit
- Other Potential Complications
- Getting Multiple Loans From the Same Lender
- Qualifying for Another Personal Loan
- Alternatives to Multiple Personal Loans
- The Takeaway
If you already have a personal loan but need more funds, you may wonder if you can take out another one. Some lenders will approve you for a second personal loan if you stay under their maximum borrowing cap. You may also be able to get a new personal loan from a different lender, provided you meet their requirements. Already having a personal loan, however, could make it harder to get approved.
Read on to learn more about how many personal loans you can have at once, how stacking personal loans can impact your credit, and alternatives to consider.
Key Points
• It’s possible to take out more than one personal loan, but having an existing loan can make it harder to get approved.
• Some lenders limit the number of concurrent loans you can have or total borrowing amount.
• Additional loans can impact your credit scores (due to hard inquiries) and increase your debt-to-income ratio.
• Responsible handling of multiple loans can positively influence credit over time, while missed payments can harm credit scores.
• Alternatives to multiple loans include 0% interest credit cards and home equity loans or lines of credit.
Can You Have More Than One Personal Loan at Once?
Technically, there is no limit on how many personal loans you can have. Whether you can get approved for a second or third personal loan will depend on the lender and your qualifications as a borrower.
Some lenders limit the number of concurrent personal loans you can have to one or two. They might also restrict you to a maximum borrowing amount (such as $50,000) across all of the personal loans you hold with them.
If you’re maxed out with your current lender, you may be able to get a new personal loan with a different lender. Generally, lenders don’t reject applicants solely due to having an existing loan. However, they may decline approval if they feel you carry too much debt and might struggle to make an additional payment.
Does It Ever Make Sense to Have Multiple Loans?
There are some situations where it can make sense to have more than one personal loan. If you took out a loan to consolidate credit card debt and then got hit with an unexpected medical or car repair bill, for example, you may be better off getting a second personal loan rather than running up new and expensive credit card debt. Before taking out another personal loan, however, it’s worth checking to see if you might qualify for a lower-cost way to borrow money (more on that below).
If you’re looking to get another personal loan to bridge a gap between your spending and income, on the other hand, taking on additional debt could add to the problem. You may be better off looking at ways to reduce expenses and pay down your existing debt.
Pros and Cons of Taking Out Multiple Personal Loans
If you’re seriously considering taking out a second or third personal loan, it’s wise to familiarize yourself with the benefits and disadvantages of doing so.
Pros of Multiple Personal Loans
On the plus side, pros include:
• Access to more cash
• Often a quick approval and disbursement process
• Ability to use loans for different purposes, such as debt consolidation and a home improvement project
• Credit building, provided the debts are handled responsibly
Cons of Multiple Personal Loans
Next, consider the downsides of taking out multiple personal loans:
• Spending more on interest
• More stress on your budget, perhaps meaning you can’t save as much
• Increased debt-to-income ratio (DTI)
• More opportunities to miss a payment, which can negatively impact your credit score
• Applying for new loans typically lowers your credit score by several points temporarily
Here is this information in chart form:
| Pros of Multiple Personal Loans | Cons of Multiple Personal Loans |
|---|---|
| Access to more cash | Spending more on interest |
| Quick approval and disbursement | Stress on your budget |
| Flexible uses | Increased DTI |
| Credit building if loans are managed responsibly | More opportunity to miss a payment, which can lower your credit score |
| Applications require a hard credit pull which can temporarily lower your credit score |
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Ways Multiple Personal Loans Can Affect Your Credit
Having multiple personal loans can have both negative and positive impacts on your credit, as noted above. Any time you apply for new credit, the lender will do a hard pull on your credit, which can cause a small, temporary dip in your scores. Multiple hard credit inquiries in a short period of time, however, can significantly harm your credit. Late or missed payments can also negatively affect your credit score.
On the plus side, taking out a new personal loan and handling it responsibly (by making on-time payments) can positively influence your credit over time.
Other Potential Complications
Here’s a look at some other ways that having multiple personal loans can affect your finances.
• Multiple payments: A new personal loan means a new monthly payment. Before you add to your debts, it’s a good idea to review your budget to ensure you can manage an additional monthly loan payment.
• Debt-to-income ratio: Each personal loan impacts your debt-to-income ratio (DTI). This ratio measures how much of your monthly income goes toward current debt. A higher DTI can make it harder to qualify for other types of loans, such as a mortgage, in the future.
• Higher interest rates: A lender could approve you for an additional personal loan but at a high annual percentage rate (APR), which is the personal loan’s interest rate blended with applicable fees and charges, because of your existing debt.
Getting Multiple Loans From the Same Lender
Before applying for an additional personal loan from your current lender, it’s a good idea to check their policies. Some lenders limit the number of outstanding personal loans you can take out at one time or cap the total amount you can borrow. In addition, some lenders require that you make a certain number of consecutive on-time payments (such as three or six) toward an existing loan before you can apply for another loan.
If you believe you’ll meet the lender’s requirements for a second personal loan — and you feel comfortable making the additional monthly payment — getting an additional loan from the same lender could be a smart strategy.
Recommended: Average Personal Loan Interest Rates
Qualifying for Another Personal Loan
If you apply for a personal loan with another lender, you won’t have to worry about a cap on the number of loans you have or the combined amount you can borrow. However, you will have to go through the whole application process, and the lender will likely perform a hard credit check. They will factor in how much debt you already carry, even though it may be with another lender.
You can get an idea of whether or not you’ll get approved for an additional personal loan by calculating your current DTI. To do this, simply add up all your current debt payments, including any auto loans, mortgage, credit cards, and student loans. If that number comes close to 50% of your monthly gross (pre-tax) income, another personal loan may not be in the cards. The max DTI for a personal loan is typically 50%. However, many lenders like to see a DTI that is less than 36%.
Recommended: Secured vs Unsecured Personal Loans: Comparison
Alternatives to Multiple Personal Loans
When you need to cover unexpected expenses, a personal loan (whether for several hundred dollars or a $15,000 personal loan or more) can be a great resource — but it’s not your only option. Here are some alternatives to personal loans you might consider.
0% Interest Credit Card
If your credit is strong, you may be able to take advantage of a credit card with a 0% introductory APR. The promo rate can last up to 21 months; after that, the card will reset to its regular APR.
If you can use the card to cover your costs and repay the balance before the 0% rate ends, it’s the equivalent to an interest-free loan. If you’ll need a significantly longer period of time, however, this route could end up costing more than a personal loan.
Home Equity Loans or Lines of Credit
A home equity loan or home equity line of credit (HELOC) may be worth exploring if you own a home and have built up significant equity. A home equity loan is a single lump sum you repay (plus interest) over time. A HELOC is a revolving line of credit that you can draw from as needed; you pay interest only on what you use.
Home equity loans and HELOCs are secured by your home, which lowers risk for the lender. As a result, they may come with lower interest rates than personal loans. A major downside of this type of loan is that, if you default on the loan, you can lose your home.
Debt Consolidation Loan
A debt consolidation loan is actually a type of personal loan, but it can be used to replace multiple debts with a single, more convenient loan.
Here’s how debt consolidation works:
• Say, you already have a $5,000 personal loan.
• You are also carrying credit card debt totaling a few thousand dollars.
• Getting a new $10,000 personal loan can allow you to eliminate both of those debts. The funds from the new loan would pay off your existing loan and credit card balances, and you would then make payments on your new single personal loans until it’s paid off.
Having one loan vs. many can help some people avoid paying a bill late or missing a payment altogether.
The Takeaway
You can have as many personal loans as you like, provided you can get approved. Some lenders limit the number of loans they’ll extend to an individual at any one time, or cap the total amount one person can borrow. To get an additional personal loan with a new lender, you’ll need to meet their qualification requirements. Having an existing personal loan could make this harder to do. However, you may get approved if your monthly income is sufficient to cover the new payment. Before you jump in, you’ll want to consider how it will impact your overall debt, credit score, and credit history.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.
FAQ
How long should you wait between loans?
A general rule of thumb is to wait at least six months between applying for new credit. Submitting multiple loan applications in a short time frame can result in several hard inquiries on your credit report, which can lower your credit score. It may also signal to lenders that you are in financial distress, which could make it harder to get approved for a new loan.
Do multiple loans affect credit score?
Multiple loans can positively and negatively impact your credit. Each new loan application can result in a hard inquiry on your credit report, which may temporarily lower your score. Having multiple loans can also increase your debt-to-income ratio, which can make you appear less creditworthy to lenders. If you consistently make on-time payments on all of your loans, however, it can positively impact your credit history over time.
What happens if you pay off a loan too quickly?
Paying off a loan early can have mixed effects. While it can save you interest payments, some lenders may charge prepayment penalties, which could offset the benefits of early repayment. When you’re shopping for loans, it’s a good idea to ask if there is an early payoff fee. Some lenders do not charge them.
Paying off a loan early can also have a slightly negative impact on your credit by bringing down your average credit history length and reducing your credit mix.
Paying off a loan early can also have a slightly negative impact on your credit by bringing down your average credit history length and reducing your credit mix.
Is it legal to have multiple personal loans?
There is no federal law against having multiple personal loans. As long as lenders approve you and you handle the debt responsibly, it should not be a problem. However, note that you typically cannot use personal loans for any illegal uses, business purposes, or tuition payments.
Can you be denied a personal loan if you already have one?
Yes, you can be denied a personal loan if you already have one. The lender may have a cap on how much applicants can borrow that you would exceed with a new loan, or your DTI (debt-to-income) ratio may exceed the amount they are comfortable with.
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