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Personal loans are popular for a number of reasons. Most personal loans are unsecured—meaning you don’t risk losing the collateral if you can’t repay it. They can also be used to cover a wide range of expenses, like paying for home repairs and financing medical treatment.
They also come with lower interest rates than you’ll find with most credit cards, and you can have the money in your bank account within a matter of days. Because personal loans offer such an easy way to borrow money, you might find yourself wondering how many personal loans you can have.
Many lenders allow you to have more than one personal loan at a time, but whether that’s a good idea depends on your financial situation. Keep reading to learn which lenders offer multiple loans and what you’ll want to know before applying.
In this review:
- How many loans can you have at once?
- The dangers of applying for multiple loans at once
- What lenders look at when deciding to approve you for a second loan
- When does it make sense to take out multiple loans?
How many loans can you have at once?
There’s not necessarily a limit as to how many loans you can have at once. In fact, it’s common for people to have more than one loan at a time. You may still have student loan debt you’re working to pay off when you take out a mortgage loan.
Or, maybe you have credit card debt and you also plan to take out an auto loan to buy a new car. There are many reasons people decide to have more than one loan at the same time.
But just because you can carry multiple loans at once doesn’t mean you should. Multiple loans mean multiple monthly loan payments, which can stretch your finances and put you in a risky position.
You need to make sure the types of debt you carry are healthy debt, and you also need to triple-check that you’ll be able to keep up with monthly payments before applying for another loan.
What about multiple personal loans?
When it comes to personal loans specifically, there’s no rule that prohibits you from having more than one. Instead, whether you can have multiple loans is determined by each lender. Some limit the number of loans you can have, while others focus more on the total amount of money you owe.
Regardless, having or applying for multiple loans could be a warning signal to lenders. When you have multiple loans of the same type, it may be an indication that you’re borrowing more rapidly that you’re able to repay, and that’s not a good cycle to fall into.
Too much personal loan debt—and the related monthly payments—won’t just eat away at your income. It will have other effects, too, such as reducing your credit score and hurting your chances of qualifying for other types of financial products, such as a home loan or mortgage refinance.
Lenders may view multiple loans as a signal that you will struggle to pay back the debt you already have and view you as a risky loan applicant.
Can you get two loans from the same bank?
If you have a lender that you like and you want to take out another loan with them, you might be in luck. Some lenders allow borrowers to hold multiple personal loans.
However, even if a lender does allow you to take out multiple loans, there are going to be restrictions. Most lenders impose a maximum loan amount, which is the total amount you’re allowed to borrow across all loans.
And you’ll need to re-apply and qualify for each new loan you take out. This can get harder the more debt you have.
A lender may also impose other restrictions, such as requiring you to wait a certain amount of time or a certain number of payments before you apply for another loan.
Lenders that allow you to borrow multiple loans at once
There are a number of lenders that allow you to have multiple personal loans at one time. These include:
- SoFi: You’re allowed to have more than one personal loan with SoFi, but only after you have made at least three on-time payments on your first personal loan. Unfortunately, Michigan residents are only allowed to have one personal loan. Learn more about this lender in our SoFi personal loan review.
- Prosper: If you have an existing loan with Prosper, you’ll need to wait nine months before applying for another. The combined outstanding loan amount can’t exceed $40,000. Read more in our Prosper personal loan review.
The dangers of applying for multiple loans at once
Applying for multiple personal loans at one time can be a risky financial move. The main risk is that you’ll end up taking on too much debt and struggle to make monthly payments. Missed or late payments can result in fees or a lower credit score.
If you’re thinking of applying for multiple loans at once to improve your chances of being approved by at least one lender, that’s not advised. Each time you apply for a loan, the lender will make a hard inquiry on your credit report that temporarily reduces your credit score.
Instead, apply for prequalified quotes from several lenders and compare quotes before committing to one loan application. Getting prequalified quotes won’t affect your credit score, but will allow lenders to take a peek at your credit in order to give you a rate quote.
Once you choose the best loan option, you’ll submit a full loan application with that lender only. This way, only one hard inquiry will be registered. Our guide to the best personal loan lenders is a great place to start getting quotes.
>> Read more: How Do Personal Loans Work?
What lenders look at when deciding to approve you for a second loan
A lender is going to consider the same factors they did when you were approved for your first loan. Paying attention to these factors will help you understand if you can qualify for another loan, and whether it’s the right move for you financially. Some of the factors they’ll consider include:
- Your credit report: Think of this as a report card for how you’ve dealt with debt in the past. Have you made on-time payments? Do you have a healthy mix of credit? Have you had credit for a long time and from a mix of lenders? All of those things go into making a good credit history. Lenders use this before they make a decision to approve you for a loan. Too much debt can hurt your credit score, but if your score is strong a lender may see you as a good candidate for another loan.
- Your debt to income ratio (DTI): Your DTI is a metric that lenders really care about. This is the sum of all of your monthly debt payments divided by your monthly gross income. Each lender will have different criteria for the maximum allowable DTI. For example, Prosper has a maximum DTI of 50%. That means all of your monthly loan payments (including your new loan) can’t make up more than 50% of your monthly income to qualify for a loan with Prosper. For example, if you have a monthly mortgage payment of $1,500, an auto loan payment of $400, and a personal loan payment of $200, your monthly debt payments are $2,100. If your monthly gross income is $6,000 your DTI is 35%.
- Your aggregate loan balance: Each lender imposes maximum loan amounts you’re allowed to have across all loans you hold with them. Even if your DTI isn’t too high, a lender may still not approve your loan because if they did, your debt would be over their maximum limit.
When does it make sense to take out multiple loans?
While it’s not always a good idea to take out multiple personal loans, there are scenarios when it can make sense. For example, maybe your first personal loan was a debt consolidation loan to bundle all of your debt into one monthly payment.
You’ve been responsibly paying down that debt and can handle the monthly payments, but a year or two later you run into a problem. Your home needs critical renovations to ensure it remains habitable, and you can’t cover the cost out of pocket.
It would likely make sense to take out an additional home improvement loan or home equity loan to cover those costs and keep you in your home.
Another scenario might be that you originally took out a personal loan to pay off your high-interest credit card debt at a lower rate. You then incur some unexpected—an expensive—medical bills, which you pay for using a medical loan.
In these situations, as long as you’re able to keep up with both debts and each loan is being used responsibly, it makes sense to have two loans.
Author: Erica Gellerman