How many loans can you have at once? It depends on the lender. While there is no legal limit as to how many personal loans you can take out at any time, lending institutions often have their set restrictions.
The beauty of personal loans is that you can use them for almost anything. The interest rates are generally lower depending on the lending institution, and you have a precise payoff date. You can take out multiple personal loans from one lender, should they allow that. You can also take numerous personal loans across several lending institutions.
From the same lender
Different lending institutions have varying rules about how many personal loans their customers can take out simultaneously. They can either have a maximum amount you can borrow or a maximum number of loans you can take out. Or, in some instances, both.
Some more popular lending institutions will allow one or two personal loans per customer. A handful of them have no maximum allowable number of personal loans, but they have a maximum loan amount that their customers have to qualify for.
From different lenders
To maximize the number of personal loans they can take out, some people apply for personal loans from several banks and lending companies. Every bank or lending company will have different rules around personal loans. You will need to meet the requirements of each lender. It is important to note that if you already have an active loan or several active loans, these will show up as debt in your credit report every time you apply for another loan. And if a bank decides that the number of loans and the total amount of debt you have is too much for your current ability to pay them off, they might deny your application.
Qualifying for multiple personal loans at once
If you are looking to take out multiple personal loans, you will need to look up the requirements of the lender or lenders you plan to borrow from. The best way to do this is to inquire about their loans, their restrictions, and the requirements they need for a personal loan application.
Tips to qualify for multiple personal loans:
- Check your credit score. Your credit score is one of the main things banks and other lending institutions look at to check your creditworthiness. This number will dictate all of your financial matters like credit limits on your credit cards, interest rates on your loans and other debt, even how much rent you pay, or if you even qualify to rent at a particular place. Knowing your credit score will allow you to make an educated guess about your chances of qualifying for a loan. Also, knowing your credit score will allow you to adjust your finances to either fix it (if you have bad credit) or further increase your score.
- Reduce your debt-to-income ratio. Your debt-to-income ratio is the ratio of the collective amount of your debt compared to your income or incoming cash flow. This is another indicator of whether you can realistically pay off your loan or if you are just in over your head. One way to reduce your debt-to-income ratio is to pay off your other debts. Pay off that credit card debt before you apply for a new loan.
- Avoid late payments. Late payments could indicate your inability to pay off your loans. This is especially important to people who plan to apply for a second loan from the same lender. They will keep track of your payment history so the timeliness of your payments will affect the approval of your loan.
- Increase your income. You need to have either a higher income or multiple sources of income, especially if you are struggling financially. Paying off debt can be a real pain and if you find yourself barely making ends meet because you are paying off multiple debts every month, try looking for a second job, a better paying one, or aim for a promotion. You will need to have a more significant cash inflow than you do expenses.
A word of caution
Personal loans are versatile, and some need no collateral. They also have higher borrowing limits, making them great for significant, unexpected expenses. It makes sense to have multiple personal loans, especially if you also have various emergencies happening one after the other. Life, after all, can be very unpredictable.
However, it is good to take caution when taking out personal loans.
You can fall into a debt trap. This happens when you borrow too much that you struggle to pay the debt off. This leads to you borrowing even more to pay off your previous debt and creating a vicious cycle of borrowing to pay off debt and then borrowing again to pay off your new debt. It is tough to climb out of a debt trap. You will need to manage your loans effectively or even consolidate them into one, should you find yourself in this situation.
Being unable to pay off your debt on time, missing payments, or defaulting on a loan could negatively affect your credit score. And when your credit score dips, you will find that the ramifications are far-reaching.
Applying for multiple personal loans in a short amount of time can cause a dip in your credit score by several points. Lenders will run hard credit checks on you, which will dock points from your credit scores.
So before you take out that second or third personal loan, first consider your ability to pay, the reality of your finances, and whether or not you need to take out a new loan.
It would also help to find a trusted lender that can let you make smaller payments with more time to pay the loan back. Payment1 Financial offers just that. Plus we offer the convenience of completing your loan application online without having to worry about visiting our office. Contact us for inquiries today.