How Many Personal Loans Can You Have at Once?

Disclosure: Stilt is a lending company. Nonetheless, we are committed to recommending the best loan products to our readers when their needs are outside Stilt’s loan offerings. 

Personal loans can solve money-related problems you may face in your life. Many different institutions provide personal loans. But one of the questions that pop up regularly among consumers is, can they take out multiple personal loans at once?

Technically speaking, you can have as many personal loans as you want at any point in time. Depending upon your eligibility criteria and credit score, lenders will be more than happy to provide you a personal loan. But there are certain things you need to know before you take out your second, third, or fourth personal loan. In this article, we’ll go over everything you need to know about taking out subsequent personal loans.

What to Know When Getting a Second Loan

Since there’s limited legislation regarding personal loans as compared to some other types of loans, they’re relatively easier to get. But this varies largely from applicant to applicant and from lender to lender.

The Biggest Obstacle Is Qualifying for a Second Loan

There’s no law prohibiting you from applying or taking out a second loan. But the biggest obstacle is qualifying for it. When you apply for any subsequent loan, lenders will see that you already have an ongoing loan. Thus, they will calculate your debt-to-income ratio, where all of your debt, including student loans and mortgage loans, will be taken into account.

If your debt-to-income ratio is high enough, then lenders will most likely reject your application straightaway. Even if some approve your second loan, they will do so at a higher rate.

You Accumulate Debt

Each time you take out a loan, you’re taking out a debt that needs to be repaid within a certain time frame. So, the more loans you take out at any given point in time, the more debt you accumulate. That means your monthly repayment amounts are going to be higher. This also increases your debt-to-income ratio. So you need to have a proper plan on how you’re going to pay all of it back.

Your Credit Score Is at Risk

You might think that taking out multiple personal loans does not affect your credit score. Only defaulting on multiple loans in a row does. While that’s true, in some cases, loan applications trigger a hard credit pull on your score. This results in a temporary drop of a few points to your credit score.

So, every time you apply for a loan, there are subsequent reductions. Please note that it’s not the loan approval that results in a reduction, but rather the inquiry that goes to check your credit score. Too many inquiries in a row will put a big dent in your score.

Taking a Second Loan With the Same Lender

The same lender might provide you 1-3 personal loans at the same time, but they will likely only do so Wafter scrutinizing your banking activity and credit score. With some lenders, there might be no limits to how many loans can be sanctioned at any given point in time. Others may have a limit as to how many loans can be taken or the total amount that can be loaned out.

You likely won’t be disqualified if you have an existing loan either from the same lender or a different lender. Even if you’ve got a low debt-to-income ratio, your lender might still approve you for a second loan. But all of the risks we talked about earlier (higher debt accumulation, credit risk) are applicable in this scenario as well.

Methodology

Stilt considers a wholistic range of features when comparing personal loan lenders, including, but not limited to: accessible customer service, reporting of payments to credit bureaus, financial education, flexible payment options, related fees, soft credit checks, and transparency of loan rates and terms. We also consider the complaints filed with agencies like the Consumer Financial Protection Bureau. Stilt is not compensated in any way for our reviews and recommendations.

Alternatives to Personal Loans

Personal loans are great for long-term commitments. When you have large, planned expenses, taking out multiple personal loans at a time might be okay. But it’s certainly not recommended if you’re in a chaotic, volatile situation. So a second loan might not be an appropriate route for you.

Moreover, if you get rejected for a second loan, what are your options? Luckily, there are a few alternatives to taking out a second loan. Here are some of our best recommendations.

Medical Card Payment Plans

If you’re taking out a second loan specifically for paying medical bills, then you might consider this option instead. There are certain medical cards available with many doctors, dentists, or surgeons. They allow you to select a payment plan for repaying your debt at low rates. This is generally provided in case of costly medical operations. So always inquire with your medical provider before taking out a second personal loan.

0% Interest Credit Cards

Credit cards are often overlooked, but they can provide quick funding. The reason they might be overlooked is because they typically have a high interest rate charged on the principal amount. But if you have a good credit score (690 or above), then chances are you’ll qualify for a 0% interest credit card. This might allow you to withdraw a quick loan without any interest. But before you take out a loan on a credit card, make sure you can pay it in full by the due date. Otherwise, it’s going to directly impact your credit score.

Secured or Cosigned Loans

To increase your chances of securing a second, third, or fourth personal loan, you can apply with a co-signer. The co-signer can be your friend or a family member. His/her credit score doesn’t have to matter either. If you can put up collateral, then your chances are even better. But the downside of applying for a personal loan with a co-signer is that the amount you can borrow will likely reduced.

Conclusion

Personal loans can help you reach your goals. But at the same time, they can shackle you and quickly become a burden. This is especially true when you take out a second or third loan in your name. As with all financial matters, you need to be aware of all the options and consequences before you opt for them.

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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