Can I take out two personal loans at once?

Looking to take out a second loan before you've paid your first one off? Find out why that might not be a good idea.

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Veronica Ott

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You already have one personal loan as well as some other financial obligations, but you want another personal loan. As a result, you might be wondering if it is possible to take out multiple personal loans and if it will have an impact on your personal finances. The short answer is both of these questions is yes – you can take out multiple personal loans and it will have an impact on your personal finances. In this guide, we’ll explore the risks of having multiple loans and what you should consider before proceeding.

How many loans can you have at once?

There isn’t an exact number of personal loans an individual can have at one time. The amount depends on the borrower’s unique circumstances. Factors such as net worth, income, expenses, payment history, credit score, the lender’s policies and existing debt affect how many loans you can carry at once.

Beware of overborrowing

Even though you may have the option to take out multiple personal loans, that doesn’t mean you should. The more debt you take on, the higher the risk of overborrowing becomes.

Overborrowing occurs when an individual has too much debt to the point where it becomes unaffordable and impacts other aspects of their life. If you overborrow, affording your debt may become an issue and could result in a downward spiral financially. You may need to liquidate your assets, reduce your expenses, find a higher paying job, refinance debt, consolidate debt or, in the worst case scenario, file for bankruptcy or a consumer proposal. In addition, your credit score could be severely impacted, which would affect your ability to borrow in the future.

3 things to consider before committing to another personal loan

  1. Other financial assistance may be needed. If you require a personal loan to pay for basic necessities, such as food and shelter, a personal loan likely won’t help your finances. In fact, this is an indicator that you’re stuck in a cycle of debt. Instead, you should seek credit counselling, debt relief or other similar financial assistance. Unlike obtaining another personal loan, these services can prevent you from financial repercussions, such as repossession or bankruptcy.
  2. Monthly obligations will increase. Multiple loans mean multiple monthly repayments. Most lenders will not approve you for a loan you can’t afford. Even if you manage to get approved, you’re at greater risk of failing to repay your debts if your financial situation changes. For example, if you lose your job or incur a large, unexpected expense, you may have difficulty making your repayments.
  3. Borrowing in the future. Generally speaking, applying for lots of debt is an indicator of financial turmoil to lenders. This information can’t be hidden because the number of times you’ve applied for debt appears on your credit report. In addition, if you overborrow and run into financial trouble, your credit score will be negatively impacted and will affect your ability to borrow in the future.

Finder survey: What are the primary reasons Canadians of different ages give for getting a loan?

ResponseGen ZGen YGen XBaby Boomers
Bills and everyday expenses13.07%10.8%9.15%1.89%
Buy a car11.93%8.86%7.26%1.89%
Pay off credit cards11.93%11.08%6.62%2.52%
Rebuild your credit9.66%7.2%3.15%2.52%
Home improvement7.39%7.48%5.68%2.52%
Buy a home5.68%6.09%0.63%0.63%
For investment purposes5.11%1.94%3.79%0.63%
Grow your business5.11%3.88%1.26%0.63%
Vehicle repair3.41%5.82%1.26%1.26%
Buy an investment property2.84%2.22%0.32%0.63%
Cover medical expenses2.84%1.94%1.58%0.63%
Purchase a large-ticket item (expensive purchase)2.84%5.82%2.84%1.89%
Take a vacation2.84%3.6%2.21%1.26%
Home repair2.27%4.99%4.1%3.14%
Debt consolidation1.7%4.71%4.42%1.26%
Buy a vacation property1.14%2.22%0.32%
Other1.14%1.11%0.95%
Pay for a wedding0.57%1.11%0.63%0.63%
Source: Finder survey by Pollfish of 1013 Canadians, August 2023

What about applying for multiple loans at the same time?

If you’re applying for multiple loans to find the best option, that’s not a problem. If you’re applying for multiple loans to obtain a large sum of financing, that could become an issue.

When you apply for a personal loan, the lender will check your credit score and credit report. Not every lender considers creditworthiness, but it’s rare to find one who doesn’t. Whenever someone pulls your credit, an inquiry will appear on your report. There are two types of inquiry: a soft inquiry and a hard inquiry. A soft inquiry has no impact on your credit score. A hard inquiry impacts your credit score, but it is nominal compared to other factors.

If you’re merely interested in comparing rates and conditions, many lenders allow you to fill out a pre-qualification or preapproval application. Upon completing this application, you’ll get a sense of the offer you’ll receive if you move forward with the process. Typically, these applications use a soft inquiry.

By applying for a ton of loans at once, you can bypass the lender’s assessment of your existing debt. Lenders assess existing debt during the application process for a reason. They want to ensure you’re not holding too much debt because it could impact your ability to repay their loan. This process helps you too because the lender is assessing your risk as well.

If you apply all at once, new debt may not appear on your credit report right away. However, hard inquiries appear on your credit report instantly. A large number of hard inquiries can communicate financial hardship to potential lenders. This is another reason you should avoid applying for too much debt at once.

4 tips to get your next personal loan application approved

Even though there are risks associated with taking out another personal loan, that doesn’t mean it’s not the right choice. Everyone’s financial position is unique. If you’ve done your due diligence and it’s still a good decision, then take out that personal loan. Below are some tips to optimize your chances of approval:

  1. Check your credit report. Checking your credit report before lenders do is good practice. There may be errors or inaccuracies on your credit report that could skew your application. Report any discrepancies you find to the credit bureau.
  2. Pay on time and in full. Giving your credit score a boost before you apply will always increase your odds of approval. Repayment history has the greatest impact on your credit score. Leading up to your application, always pay on time and in full.
  3. Pay down debt. The less debt you have, the more attractive you are to lenders. In addition, paying down debt can boost your credit score.
  4. Prepare a budget. Before considering personal loan offers, you should establish how much you can afford by making a budget. In addition, lenders are more likely to approve your loan if they’re confident you’ve got a good handle on your finances. Arriving prepared with a budget is one way of proving yourself financially.

Got an ongoing project? Consider a line of credit

In some cases, a line of credit might make more sense than a personal loan. This is especially true if you have an ongoing project, such as home renovations or a seasonal business. A line of credit might be more ideal because it’s a more flexible form of financing. Lines of credit have substantial credit limits, lower interest rates and only interest payments are due monthly. In addition, lines of credit do not disappear, even if you’re not using them, and you can withdraw as much or as little as you need as long as it doesn’t surpass the limit.

Bottom line

You can take out multiple personal loans at once but that doesn’t mean you should. Before proceeding with a second, third or even fourth personal loan, be sure to assess your financial position, goals and what you can realistically afford. In addition, you should consider other financial products before committing to a personal loan. You might find that there’s a better solution, such as a credit card or line of credit.

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Veronica Ott was a writer at Finder. She's written for numerous finance and business websites including Loans Canada, Borrowell and Fresh Start Finance. She previously worked as a professional chartered accountant in the private equity and advertising industries. See full bio

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