If you already have a personal loan, can you get another one? The short answer is yes. There’s no limit to the number of personal loans you’re allowed to have. However, the amount of debt you can take on is limited to how much a lender is willing to let you borrow.
Key Takeaways
- You can technically have any number of personal loans; however, lenders may be less willing to approve your personal loan application if you already have outstanding personal loans.
- Taking out an additional personal loan may make sense in certain circumstances, but this can have a negative effect on your credit score and debt-to-income (DTI) ratio.
- Instead of taking out an additional personal loan, consider alternatives like applying for a 0% annual percentage rate (APR) credit card or taking out a loan against your 401(k).
Can You Have More than One Personal Loan?
There’s no formal restriction on how many personal loans you can have at once. However, some lenders might set their own limits on how many concurrent personal loans you can have with them.
Additionally, when lenders review your application, they will consider how many other loans you have outstanding with other providers. If you have several personal loans in repayment, a lender might be reluctant to approve another personal loan for you.
Is It Convenient to Have Multiple Personal Loans?
Taking on debt is rarely preferred, but you might be in a position that requires you to have multiple personal loans. For example, you may have used a personal loan to cover moving costs. Now that you’re settled, however, you might be experiencing an emergency and need a little extra cash. Getting another personal loan to deal with this unexpected expense might be necessary.
However, there are some considerations when you have multiple personal loans at once:
- Credit inquiries: Each time you get a new personal loan, it creates a hard inquiry on your credit report, which can negatively impact your credit score.
- Multiple payments: Additionally, a new personal loan means a new monthly payment. Review your budget to make sure you can manage multiple loan payments each month. Missing a payment can also hurt your credit score.
- Debt-to-income (DTI) ratio: Each personal loan impacts your DTI ratio. This key metric gauges how much you must pay monthly versus your income. To find your DTI, add up all your debt payments, including credit cards, auto loans, and mortgage payments, and divide it by your gross monthly income. If you’re applying for another loan, such as a mortgage, having multiple personal loans increasing the percentage of your income that goes toward debt payments can potentially make it harder to qualify for another loan.
Getting Multiple Personal Loans from the Same Lender
When applying for a new loan with the same lender, check to find out what the requirements are. Some lenders place limitations on the number of loans they offer to one borrower, or they might have a cap on the total amount that one person can borrow.
Next, make sure your current loan is in good standing. In many cases, if you’ve missed payments or if your loan isn’t up-to-date, then the lender might not want to let you borrow more money from them. If your second loan application is approved, you might also pay a higher interest rate.
Another consideration is whether the lender offers a refinancing option. Rather than getting two loans with one lender, the lender might roll your current loan into the new one. The total balance will be larger, but you’ll only have one payment.
Carefully consider whether you want to use the refinancing model to get a loan from the same lender. You might end up with a longer loan term overall or a higher interest rate. Read the terms of any refinancing agreements to ensure you know what to expect.
Getting Approved for a Personal Loan From Another Lender
In some cases, getting a loan from the same lender might streamline the process. The application might be shorter, or other requirements might be more lax.
When you apply for a personal loan from another lender, you’ll have to go through the whole application process, and the lender will likely perform a hard credit check. Additionally, even if you’re not subject to a cap on the total amount borrowed with one lender, the new lender will still check your DTI. Review your DTI to make sure it falls within the parameters set by the lender, and read through the terms and conditions carefully.
Impact of Multiple Loans on Your Credit Score
Any new loan will likely impact the new credit portion of your credit score. The hard inquiries on multiple personal loans can also start to add up and affect your credit score.
Additionally, your payment history will be impacted. If you make payments on time and in full, your score will be positively affected. When you miss a payment, however, that can drag your score lower. Consider creating a system to stay on top of payments so that you’re less likely to miss one.
How Do People Use Personal Loans?
Investopedia commissioned a national survey of 962 U.S. adults between Aug. 14, 2023, to Sept. 15, 2023, who had taken out a personal loan to learn how they used their loan proceeds and how they might use future personal loans. Debt consolidation was the most common reason people borrowed money, followed by home improvement and other large expenditures.
Alternatives to a Personal Loan
If you’re not sure that you want another personal loan, or if you don’t get approved, here are some potential alternatives to a personal loan:
- Credit card: If you have a good credit score, you might qualify for a 0% annual percentage rate (APR) credit card. You’ll potentially have an introductory rate of six to 21 months. If you have a plan to pay off the purchase in that time, you could save money on interest.
- Buy now, pay later (BNPL): Another option is to use BNPL, which is a loan offered at the point of sale. You might have a few weeks to pay off what you borrow, or you could have years. Terms vary widely by provider, so make sure you understand the debt you’d be taking on before you agree.
- Retirement account loan: You might be able to get a loan against your 401(k) to cover a cost. Instead of borrowing money from a lender, you'll be borrowing from your current balance. The balance is repaid, including interest over time, but if you fail to repay the total amount according to the loan's terms, it will be considered a plan distribution and subject to income tax and possibly early withdrawal penalties. You'll also lose time in the market, and if you leave your job, the entire amount could come due.
Retirement account loans can be correlated with the prime rate plus an additional 1% to 2% (depending on your 401(k) plan). The Federal Reserve’s recent series of rate hikes could influence retirement account loan repayment interest rates by 4% to 5% in different cycles.
How Can I Increase my Existing Personal Loan?
You can’t increase an existing loan amount, but you can apply for another personal loan. Alternatively, you can refinance your current loan into a bigger one.
How Long Do You Have to Wait to Apply for Another Loan?
You can apply for another personal loan at any time. However, some lenders might be less inclined to approve your application if you already have outstanding personal debt.
How Much Debt Is too Much?
In general, you should avoid debt when possible. However, if you need a loan, it’s important to consider how much debt you’re comfortable with and whether you can comfortably afford the payments. The bare minimum to shoot for is to keep your total debt-to-income (DTI) ratio across all debt to less than 50%, while something closer to 36% would be a more optimal benchmark.
The Bottom Line
You can borrow as much as a lender will let you. This includes getting multiple personal loans. When applying for more debt, however, it’s important to consider your own finances and goals. Try to avoid getting too many loans, and make sure that you’re comfortable with the monthly payments before taking on anything new.
