How Many Personal Loans Can You Have?
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These days, personal loans have become an accessible financial tool for covering a variety of expenses—from consolidating debt to home improvements. But what if you need more than one personal loan? Can you have unlimited personal loans based on an impeccable credit score or is there a limit? Is it possible to have multiple personal loans at once, and what should you consider before taking that step? Let’s break it down below.
In this article
How many personal loans can you have all at once?
While technically there is no limit, managing multiple personal loans can be challenging and stressful, especially when trying to balance monthly payments. It’s critical to evaluate whether taking on more debt is right for your current financial situation, without overburdening yourself with debt payments you can’t afford.
Lenders will assess your financial situation before approving an additional personal loan. They evaluate your existing loans, monthly debt payments, and whether taking on more debt could strain your finances. This means that while you might be eligible to take on multiple personal loans, it's essential to evaluate your overall financial stability before doing so.
Use AmONE to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- With personal loan interest rates rising, now could be a great time to find a personal loan. Through our partner AmONE, you could get matched to a lender who could offer as much as a $50k loan with rates as low as 5.99% APR.
- Approval and loan terms vary based on applicant qualifications. Not all applicants will qualify for the full amount or lowest available rates. It takes minutes to see your results. And don't worry- filling out the form won't hurt your credit score and is free, so why not give it a try?
Types of loans you can use in conjunction with personal loans
When considering multiple personal loans, it's also important to understand how personal loans can interact with other types of financing. Here are some other loan types that borrowers may have alongside personal loans:
Real examples of taking out multiple personal loans
To get a complete grasp of the impact of taking out multiple personal loans, let's look at two real-life scenarios where individuals, friends of ours in fact, took out different loans at the same time. These real-life examples will attempt to show having multiple loans can affect monthly payments, total interest paid, and overall financial health.
Example 1: Camilo takes out two personal loans
Camilo, a homeowner with a good credit score of 720, decides to take out two personal loans simultaneously to cover home improvement costs and consolidate his credit card debt.
In this scenario, Camilo is able to manage his monthly payments comfortably because of his stable income and good credit score. However, the total amount paid in interest over the course of both loans is significant. A potential strategy for Camilo could be to refinance the loans if interest rates drop, allowing him to save money on interest.
Example 2: Sarah takes out three personal loans
Sarah, an individual with a credit score of 650, decides to take out three personal loans to cover medical expenses, home repairs, and a family emergency. Her DTI ratio is slightly higher, which affects the interest rates she qualifies for.
Sarah's situation shows how easy it is to fall into higher-interest debt when managing multiple loans, especially under challenging circumstances. If you find yourself in a similar situation as our friend Sarah, know that options like debt consolidation or working with a financial advisor can provide relief and help you get back on your feet with the payments.
Related: Hidden costs of personal loans
What factors play into the ability to take out multiple personal loans?
Credit score and credit history
Lenders rely on your credit score and credit history to determine whether you are a good candidate for additional personal loans. A borrower's FICO score plays a significant role in determining eligibility and interest rates. A good credit score—or even excellent credit—increases the likelihood of being approved for more loans with a lower interest rate. However, if you have a poor credit score, lenders may hesitate to approve an additional loan, or they may offer loans at a higher interest rate.
A good credit score can also help you secure better loan terms, such as lower origination fees and flexible repayment options. On the other hand, a low credit score may limit your loan options to high-interest loans, which can be costly in the long run. It's essential to monitor your credit report regularly and address any issues that could negatively impact your credit score.
Debt-to-Income ratio (DTI)
Lenders also consider your debt-to-income (DTI) ratio, which measures how much of your monthly gross income goes toward paying existing debt. A high DTI ratio can make obtaining a new loan difficult, which can be frustrating if you urgently need funds. However, by gradually paying down existing debts or exploring ways to increase income, you can improve your chances of approval. Remember, this is a process, and even small steps can eventually make a big difference.
Generally, a DTI ratio below 36% is considered favorable by most lenders, while a higher DTI ratio may limit your ability to qualify for additional loans. To improve your DTI ratio, consider paying down existing debt or increasing your income. Lowering your DTI ratio can not only improve your chances of getting approved for a new loan but also help you secure better loan offers with lower interest rates.
Existing loan obligations
If you already have personal loans, auto loans, student loans, or a line of credit, lenders will look closely at these obligations. They will also take into account factors like loan terms, late payments, and whether you've been making on-time payments consistently.
Managing multiple types of debt can be challenging, especially if you have loans with different repayment schedules and interest rates. Missing a loan payment can have a significant negative impact on your credit score, which will, in turn, affect your eligibility for future loans.
Financial situation and eligibility
Your current financial situation will determine your eligibility for a second personal loan. This includes considering your gross monthly income, any credit inquiry, and overall financial stability. Lenders want to ensure that you have the ability to make loan payments consistently. First-time borrowers may face different criteria compared to those who have taken loans before. Additionally, lenders need to be verified through the Nationwide Multistate Licensing System (NMLS) for credibility, so it's important to work with verified lenders.
A good credit score can also help you out when securing better loan terms, such as lower origination fees and flexible repayment options. On the other hand, a low credit score may limit your loan options to high-interest loans, which can be costly in the long run.
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Pros and cons of having multiple personal loans
Taking out multiple personal loans can have both advantages and disadvantages. Understanding the pros and cons can help you make an informed decision about whether this approach is right for your financial situation.
Pros
Debt consolidation. If you use a new personal loan to consolidate existing debt, you can simplify monthly payments and potentially get a lower interest rate. For example, using a personal loan to consolidate credit card debt may save you money in interest over time. Debt consolidation can also improve your credit score by reducing your credit utilization ratio, which is a significant factor in calculating your credit score. Lowering your credit utilization can positively impact your credit report and make you a more attractive borrower for future loans.
Access to more funds. A second personal loan can provide additional funds for expenses like home improvement or unexpected costs. Borrowers may also use personal loans to cover medical expenses, moving costs, or other emergencies that require immediate financial attention. Personal loans can be more accessible than other types of loans, such as home equity loans or lines of credit, making them a convenient choice for those who need quick access to funds. However, it’s important to use the funds wisely and avoid taking on more debt than you can comfortably manage.
Cons
Higher interest rates. Depending on your credit history and DTI ratio, an additional loan may come with a higher interest rate, making repayment more costly over time. Borrowers with bad credit or a high DTI ratio may only qualify for high-interest loans, which can lead to increased financial strain. High-interest rates can significantly increase the total amount you repay over the life of the loan.
Impact on credit score. Each loan application results in a hard inquiry on your credit report, which can temporarily lower your credit score. Additionally, managing multiple personal loans can increase the risk of missed or late payments, negatively affecting your credit score. Late payments can stay on your credit report for up to seven years, making it harder to qualify for future loans or secure favorable loan terms.
How to manage multiple personal loans
If you have decided to take out multiple personal loans, managing them effectively is crucial for maintaining good financial health. Here are some tips:
- Refinance to get better rates. If interest rates have dropped since you first took out your loans, or if your credit score has improved, you may be able to refinance for a lower interest rate. This can help reduce your monthly payments and make your loans more manageable. Refinancing can also be a useful strategy for consolidating multiple loans into a single loan with one monthly payment. By refinancing, you can take advantage of lower rates and potentially save money over the life of the loan.
- Consider debt consolidation. If managing multiple loans is overwhelming, consider consolidating them into one loan. Debt consolidation can simplify your monthly payments, making it easier to keep track of due dates and reducing the likelihood of missed payments. Debt consolidation loans are often available at lower interest rates compared to credit cards or other high-interest debt. This can help reduce your monthly debt payments and improve your overall financial stability. Think carefully though as it's important to avoid accumulating new debt after consolidating, as this can lead to a cycle of borrowing that is difficult to break.
- Stay on top of monthly payments. Staying on top of monthly payments is often easier said than done, especially when unexpected expenses arise. Setting up automatic payments can help alleviate some stress, allowing you to focus on other aspects of your financial well-being. If you’re struggling to make ends meet and down on your luck financially, think about speaking with your lenders about temporary relief options—they may be more understanding than you expect.
Use AmONE to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- With personal loan interest rates rising, now could be a great time to find a personal loan. Through our partner AmONE, you could get matched to a lender who could offer as much as a $50k loan with rates as low as 5.99% APR.
- Approval and loan terms vary based on applicant qualifications. Not all applicants will qualify for the full amount or lowest available rates. It takes minutes to see your results. And don't worry- filling out the form won't hurt your credit score and is free, so why not give it a try?
The bottom line
While there is technically no limit to how many personal loans you can have at once, it is important to consider the impact on your financial health. Lenders look at factors such as your credit score, debt-to-income ratio, and financial situation before approving an additional loan. The key to successfully managing multiple personal loans is to evaluate your financial capacity, consolidate debt when necessary, and maintain on-time payments. Always consider whether taking on more debt aligns with your long-term financial goals and personal situation before applying for another loan.
At the end of the day, managing multiple personal loans is possible, but it requires careful planning, consideration, and solid admin skills. If you're feeling overwhelmed, remember that seeking professional advice or using tools like budgeting apps can help out a ton. Everyone’s financial situation is different and contains different peaks and valleys. Make sure that when you are slowly descending into a valley, you don’t take on too many loans that you can’t afford.
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Writer
Benjamin is a writer and entrepreneur who spent 15 years in Asis involved in the real estate and financial services industry. He currently writes about finance, real estate, geopolitics, and short stories involving his cat from Argentina named Tuki. He has written for The Motley Fool, SuperMoney, and other online and offline publications spanning the globe.
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