Taking out multiple loans simultaneously is not so common an occurrence for those who are looking for big money; however, if your starting your life fresh, you may be thinking to apply for the car loan and mortgage loan together. If this is an option you’ve been considering, you first want to learn of what you can expect from this type of endeavor. For some it may work perfectly, while others may not find it so desirable. Let’s find out which applies to you.
Why It May Work for You
If you are already on the market for a new home and vehicle then taking out both the car loan and mortgage loan at the same time may be beneficial. Probably the biggest benefit of taking this route is being able to work with one company to get it all done while possibly taking advantage of a discount for your auto loan as a result of buying your house through the same company.
Also, an option that works well for some borrowers who are refinancing a home and buying a new vehicle is the cash out refinance. In this case, if you owe money, you can refinance for the amount you owe plus the amount you want to pay for the car, the latter of which will be given to you in cash. This brings about an interesting twist to taking out multiple loans.
Why It May Not be Such a Great Idea
One reason that many borrowers would prefer to stay away from taking out multiple loans – especially if it’s both the car and mortgage loan – is because it’s so easy to get declined or be forced into a higher interest rate. Most creditors are looking to make sure that you have sufficient income and can prove that you manage debt responsibly before you’ll be considered (your debt-to-income ratio must fall should be less than 36 percent).
Also, because you’re applying for two lines of credit, you may suffer the negative impact of having two major inquiries on your report, which can lower your FICO score temporarily. Because the process can negatively affect your credit, some feel that it’s just not worth it to take them on at the same time.
Taking out multiple loans can be pretty overwhelming, so before you agree to obtain both the car and mortgage loan, conduct plenty of research and weigh all of your options, and be sure to search for the best car loan available.