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There's no legal limit to how many loans you can take out at the same time. But even if your lender allows you to have more than one personal loan at once, you might not qualify. You generally need to show you have enough room in your budget for additional repayments to get approved.
Yes, you can usually take out another personal loan with another lender. And some even allow you to take out a second loan before you've repaid the first. Usually, you have to pay off part of your initial balance — on time — before you can qualify for another personal loan with the same lender.
But getting approved for a second loan is often more difficult than the first. That's because lenders take a hard look at your monthly cash flow and debt-to-income ratio (DTI) when you apply. Having a loan with a high balance can also also lower your credit score. This makes it harder to qualify for a low interest rate and origination fee.
You might want to rethink that loan for another reason: Overborrowing. Borrowing more than you need will increase your monthly payments and the overall cost of your loan, making it more difficult for you to pay off your debts. It can also spark a cycle of debt if you become dependent on loans as a source of capital.
Avoid overborrowing by calculating exactly how much you need before applying for a personal loan and only applying for that amount.
Each lender has its own requirements for taking out a second loan before you’ve paid off the first. Here are the second loan policies of six top online lenders:
That depends on your lender — or lenders — and your income. Most personal loan providers won’t lend to you if your DTI ratio is 43% or higher. This means that your monthly loan payments, bills and other costs can’t be worth more than 43% of your income before taxes.
You can, but it’s not always wise. Applying for multiple loans at the same time could hurt your credit score, since each completed application typically involves a hard credit check. If you can’t qualify for the full amount you want to borrow from one lender, that could be a sign that you can’t afford to borrow that much.
If you’re just interested in comparing rates, many lenders allow you to fill out a prequalification or preapproval application to get an idea of what kind of loan you might get if you continue. These typically use a soft credit pull, which has no impact on your credit. Taking further steps often involves a hard credit check, which can temporarily lower your credit score.
Rate shopping is when you apply for multiple loans over a short period of time. If you’re applying for roughly the same amount of money with similar lenders, credit bureaus often recognize that you’re trying to find the best rate, not actually attempting to take out multiple loans.
In this case, credit reporting agencies count all hard inquiries from lenders within a certain period — usually between 14 and 45 days — as one. The inquiry also won’t appear on your credit report immediately, allowing you to look for multiple loans with your original credit profile.
Get a list of personalized options by selecting your credit score range and state of residence.
You’ve decided it makes financial sense to get a second loan. Here are four steps you can take to increase your chances of approval:
When you’re not sure how much you’re going to end up needing to borrow, a line of credit might make more sense than applying for a personal loan. Lines of credit have the flexibility of a credit card — you can withdraw however much you need — but they typically come with higher credit limits and lower rates, similar to a personal loan.
Some are revolving and come with minimum monthly payments like you’d get with a credit card. Others come with fixed terms, typically one to five years.
It’s possible to take out more than one loan at once, but it could damage your credit and increase your debt-to-income ratio, making it more difficult for you to qualify for competitive rates in the future. Overborrowing can also lead to unaffordable monthly payments and a cycle of debt.
This doesn’t mean a second loan is always a terrible idea. If you find yourself needing more funds than you originally anticipated, you can afford to take on more debt and you’ve paid off some of your original loan already, a second loan could help. Use our personal loans guide as a starting point to find and compare lenders.
Answers to more questions about taking out another loan.
Possibly. Some lenders allow you to increase the amount on a loan you’ve already taken out, though many don’t. Your lender might treat this request like another loan application and your interest rate could change after you apply.
Generally, banks don't allow you to accept two personal loans from multiple lenders. Even if you qualify at first, both loans will show up on your credit report, which banks monitor. Depending on the bank's policy you may be asked to return the funds. You may be able to find out what happens if you take out two loans at once by reading the loan contract.
Most lenders offer personal loans with terms ranging from one to five years, though it depends. You can find loans with terms as long as 25 years, though a longer term can result in more interest paid over time.
Is it cheaper to pay off a loan early?
It can be if your lender doesn’t charge prepayment fees. Reach out to your lender’s customer service line to make sure you understand the terms before making early payments on a loan.
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