How Many Personal Loans Can You Have at Once? What You Should Know
Written by
Dawn Allcot
Edited by
Melanie Grafil
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If you think you need to take on another personal loan, there are no official federal laws that say you can’t.
It really depends on whether you qualify for two loans or not. Those factors include:
- Your credit
- Your income
- How much debt you currently have, such as in personal loans, credit cards, mortgages or auto loans
Lenders will evaluate your debt-to-income ratio to see if you can manage another payment. You may get approved for another loan if you have a high credit score and strong finances, in general. Â
Can You Get Two Loans From the Same Bank?
Some banks do allow more than one personal loan at the same time as long as you’ve made payments on time for the first loan.
On the other hand, other banks require you to pay off the first loan before applying for a second loan. Some banks have borrowing limits across loans. For instance, Citi® allows customers to borrow up to $30,000, which can be spread across multiple loans as long as your first loan is current.
Banks may want to see you pay off the first loan before applying for another. This is a question you’ll want to ask when you shop around for loans, along with comparing terms, interest rates and fees.
The table below outlines qualifications for several popular lenders. Many lenders don’t list the rules on their website, so you may have to reach out to customer support before applying for a second loan.
| Lender | Multiple Loans? | Limitations or Requirements |
|---|---|---|
| Citi | Yes | Up to $30K |
| SoFi® | Yes | Must make three consecutive on-time payments on the first loan before applying |
| Upstart | Yes | Can take out a second loan six months after the first |
| LendingClub | Yes | Up to $50K |
Can You Take Personal Loans From Different Banks?
According to GOBankingRates’ research on this topic, many popular banks and lenders don’t explicitly state whether or not you can take out a loan if you already have a personal loan through another bank or lender.
However, as long as you qualify based on your credit score and debt-to-income ratio, you’ll likely be approved for a second loan from a different financial institution. However, multiple loans coupled with other debt can increase your DTI, making it harder to qualify.
Keep in mind, each personal loan application leads to a hard inquiry on your credit report, which will cause your credit score to drop temporarily. Credit inquiries stay in your file for up to two years. Your score will also drop once the loan is funded, as a result of a new account opening. This reduces the average length of your accounts.
Pros and Cons of Having Multiple Personal Loans
As with any financial decision, taking out multiple personal loans has pros and cons.
| Pros | Cons |
|---|---|
| Access additional funds | Reduces credit score temporarily |
| Two smaller payments, instead of one larger payment | Increases your DTI |
| Use money for multiple purposes | May be harder to obtain additional loans or credit |
| Potentially lower interest rate on second loan, if your qualifications have improved | May increase risk of default |
| Improve your credit with on-time payments | Harder to track multiple due dates |
When Does It Make Sense To Take Out Another Personal Loan?
It might make sense to take out a separate personal loan if your first loan is nearly paid off and you are looking to cover additional, separate expenses. For instance, maybe you took out a personal loan for a kitchen renovation. Now that the project is done, you want to replace your roof. A second loan could be a smart choice. You can replace one monthly loan payment with another without having to adjust your budget.
If you’re consolidating high-interest debt into one loan, a personal loan is usually a better choice than struggling with credit card debt.
If your credit has improved but you can’t refinance your current loan at a lower interest rate, it makes sense to take out a second loan and then pay off the first one, as long as there are no pre-payment penalties.
If an emergency expense has cropped up, like home or car repairs, and you have no other way to fund it, a personal loan with a low interest rate might be your best choice, even if you already have a personal loan on the books that you’ve used for a different purpose.
When You Should Avoid Getting Another Loan
These are some clear signs getting a loan isn’t the right choice.
You’re Already Struggling To Make Payments
Another loan is likely to cause issues like missed payments or defaults rather than helping your financial situation.
There’s one exception here: If you plan to take out a second loan at a lower interest rate and pay off the first one, this could be a smart money move.
You Have a Low Credit Score
If you have a low credit score and you’re likely to get higher interest rates, skip a second loan and consider alternatives to get access to extra cash.
Your DTI Is Over 36%
If your DTI ratio is already over 36% or so, you likely won’t get approved for a second loan. A loan application requires a hard credit pull, which will reduce your credit score for up to two years. If you aren’t sure if you’ll qualify, look for a lender that does a soft credit check for preapproval.
You’re Using the Personal Loan To Pay for Other Debts
If you’re borrowing to keep up with minimum payments on credit cards and other loans, consider a debt consolidation loan or credit counseling, instead.
Alternatives to Taking Out Multiple Personal Loans
If you’re considering taking out a personal loan to cover emergency expenses or other debt, there might be better options for your long-term financial well-being.
Debt Consolidation Loan
A debt consolidation loan lets you combine high-interest debts into one monthly payment, ideally at a lower interest rate.
Balance Transfer Credit Card
If you have good credit, open a card with a 0% intro APR and budget payments to pay off your debt before the interest rate rises.
Home Equity Loan, HELOC or Cash-out Refi
You may get a lower interest rate by tapping into your home’s equity, especially if you need money for home improvements or emergency home repairs. But be aware that if you don’t make the payments on time, you could put your home at risk of foreclosure. If you opt for a cash-out refinance, instead of a home equity loan which requires a separate loan payment, it may also increase your monthly mortgage payment.
Nonprofit Help or Credit Counseling
If you’re struggling with high-interest debt, consider checking with the National Foundation for Credit Counseling (NFCC), a nonprofit that can help you create a debt management plan, consolidate debt or provide free or low-cost guidance for debt relief.
FAQ: Having Multiple Personal Loans
Before you take on more debt, you should know how multiple personal loans can affect your credit score and your budget. Take a look at these commons answers to frequently asked questions.- Can I take out another loan while still repaying the first one?
- Some lenders will allow you to take out a second personal loan even if you already have one on the books. You can also go to a different lender. As long as your debt-to-income ratio and credit score are good, you may qualify for a second loan.
- How does having multiple loans affect my credit?
- Having multiple loans increases your debt-to-income ratio, which can lower your credit score and make it harder to access additional credit. Keep in mind that every new credit inquiry and new loan you open will reduce your credit score, as well.
- What are better alternatives to taking multiple personal loans?
- If you are struggling with high-interest debt or emergency expenses, consider opening a 0% intro APR credit card or a debt consolidation loan if you have good credit. Alternatively, consider side gigs to earn more income. Organizations like the NFCC can also help with debt management and paying off credit card debt.
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