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Can you have two car loans at the same time?
Lenders allow it — but it can be difficult to qualify for low rates.
Having two cars isn't abnormal for most families, but two car loans can put a strain on your finances. Before you apply, make sure you can afford it — and that you can prove it to your lender.
Can I have two car loans at one time?
Yes, you can have two car loans at one time, but it may be more difficult to qualify for a second loan. Lenders only approve you if your income and debt can handle the added monthly expense.
And even if you are approved, you need good to excellent credit to score a low APR. Without that, you may face higher rates and a lower total loan amount — which limits how much car you can afford.
Compare financing options for your first or second car loan
Is having two car loans at the same time a good idea?
It depends on your finances. Like any loan, applying for a second car loan will result in a hard credit check, which can temporarily lower your credit score.
A second car loan will also increase your debt-to-income ratio, which may make it more difficult to improve your credit after you buy your car. Future lenders may be more unlikely to offer you a good rate, and the added monthly cost could make it more difficult to budget for other regular expenses.
However, if you already have excellent credit, limited debt and a strong income, a second car loan may not have as big of an impact. With that said, you should still consider your options carefully and understand the full impact two car loans could have on your financial profile.
Can I finance one car with two loans?
You may be able to, but it's not recommended. Borrowing two car loans for one car will only increase the amount of debt you have and make it more difficult to afford monthly repayments. Instead, consider financing a less expensive car or saving for a down payment to reduce the amount you have to borrow.
What do lenders consider when looking at your application?
Four factors typically play a large role when you apply for a second car loan:
- Credit score and history. A lender wants to see a history of on-time repayments. If you've missed any payments recently — on your current car loan or other accounts — a lender is less likely to approve you.
- Income. Lenders may look at if your income can support another car loan and other expenses that come with it. Things like car insurance, maintenance and other common costs may not fit on your budget, which can make it harder to qualify for a second loan.
- Other debts. Your debt-to-income ratio should be below 43% — and the lower it is, the better your chances of qualifying. If most of your income is already going toward debt, you won't be able to afford a second loan.
- Car value. If you already have a car picked out, a lender will take its value into consideration. Opting for an inexpensive used model may help increase your chances of approval. The smaller the loan, the better the chance you'll be able to make payments on two cars.
3 tips to increase your chances of approval
Lenders view your application with more scrutiny if you already have a car loan. To help increase your chance of scoring a second car loan, use these tips:
- Apply with a coapplicant. Applying with a spouse or parent can help boost your income and credit score rating. However, not all lenders accept coapplicants, and keep in mind that whomever you apply with shares equal responsibility for the loan and may need to have their name included on the title.
- Save up for a large down payment. A large down payment — 20% or more of the car's value — proves that you have the finances to handle the loan. It also means you're going to borrow less, which will help keep your second car payment affordable.
- Switch to a less expense car. Downgrading your current car can help reduce your debt-to-income ratio, which will show that you can take on a second loan without straining your finances.
Does having two car loans hurt your credit?
Having a second car loan doesn't necessarily hurt your credit score. Lenders just want to see that you can responsibly handle any types of credit in your name, whether that's credit cards, car loans or personal loans. So as long as you make your car loan payments on time, financing more than one car shouldn't impact your credit score negatively. In fact, it could actually improve your credit score over time.
Of course, the lender will do a hard pull on your credit when you apply for the new car loan, which will temporarily drop your credit score. But by making consistent on-time payments, your credit score should recover quickly.
At the end of the day, there isn't much to a second car loan. Provided you understand the expense of owning a car, it works like any other loan. To get the best deal, compare your car loan options before applying with a lender.
Frequently asked questions
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