Personal loans are a popular way for people to fund big expenses or to pay off other debts. They offer a fixed interest rate, so you know how much you’ll have to pay back each month. But you may want to know how many personal loans can you have at once?
The answer depends on your circumstances, but you can have more than one personal loan at a time. There’s no upper limit on how many loans you can have. But if you want to take out multiple personal loans, there are factors you need to consider.
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Is it a good idea to have multiple personal loans at once?
If you’re taking out personal loans to pay for day to day expenses, then they’re not a good idea. Personal loans should only be used when necessary. For example, let’s say you’ve got an existing loan like a short term loan, emergency loan, etc., then your car breaks down and needs an expensive repair.
You might have to take out a second loan to fix it. In this case, multiple loans make sense.
If you want to take out multiple loans, ask yourself the following questions:
- Is the additional personal loan really necessary or can you live without it?
- If it’s essential to take out more than one loan, can you afford to pay it back?
Why you shouldn’t borrow multiple personal loans at once?
Having lots of loans can lead you into a spiral of debt which can quickly use up all your income. This is one of the reasons for not borrowing multiple personal loans at once. Here are some other reasons.
1. Debt to income ratio
If you have multiple personal loans, it can increase your debt-to-income ratio. This is the amount of debt you have relative to your income. A high debt-to-income ratio can make it more difficult for you to get approved for new loans. It can also impact your credit score.
2. The impact on your credit score
One of the most important factors to consider is your credit score. Having a lot of personal loans can impact your credit score. Lenders look at your credit report to decide if they’ll approve your loan application. And what interest rate they’ll offer. That’s why it’s worth looking after your credit score.
3. Extra interest and total monthly debt payments
All loans come with interest, and the more loans you have the more you’ll have to pay back. When you apply for a new personal loan, the lenders will see any loans that you already have. This might cause them to offer you a higher interest rate on a new loan. In turn, this’ll increase your total monthly debt repayments even further.
4. Less money to spend on other expenses
The more money you’re paying towards your debts, the less money you have to spend on other things. This can become a problem if it stops you from being able to pay for other important expenses. If you take out too many personal loans, you could end up having to borrow money just to repay your debts.
Can you take out multiple personal loans with the same lender?
Yes, there are some lenders who’ll let you have more than one personal loan with them at once. At Lending Stream, we allow people to have a maximum of 2 open loans with us. But generally, this will depend on your repayment history and credit rating. You must show that you can afford the repayments before taking out a second personal loan.
Can I get a personal loan from multiple banks?
Yes, there are banks who’ll let you take out a personal loan with them when you’ve already got loans with different lenders. But they’ll only lend to you once they’ve done their checks. They need to be satisfied that:
- You can afford the repayments
- You are not getting yourself into too much debt with too many personal loans
- You have a good credit rating
How do multiple personal loans affect your credit report?
Having more than one personal loan will affect your credit report in the following ways.
- When you apply for a personal loan, it leaves a mark on your credit file. This shows other lenders that you’ve applied for a loan. If you make a few applications close together, it affects your credit rating.
- If you have too much debt compared to your income, then it’ll negatively affect your credit score.
- Keeping your debt to around 40% of your income and keeping up to date with your loan repayments could help your credit score. It shows that you’re good at managing your debts.
What to check before applying for multiple loans?
There are things you can do before you apply for another personal loan that’ll improve your chances of approval.
1. Check your affordability
Reputable lenders in the UK are registered with the Financial Conduct Authority (FCA). This means that they follow the FCA rules on lending. One of these is that the lender has to be sure that you can afford to repay the personal loan. So, check that you can prove that you can afford the repayments before applying.
2. Check your credit score
Your credit score is going to be a factor in your application, lenders will look at your credit file. Have a look at yours before you apply to see if it needs a boost. You can check it with the Credit Reference Agencies. They’ll have tips on how you can improve your credit score.
3. Compare multiple lenders before you borrow money
Not all lenders have the same lending criteria. By shopping around, you can compare who you’re eligible to apply with, and who’s offering the best terms. Some might offer better interest rates and repayment terms than others. So, find the one that’s best for what you need the personal loan for.
How to manage multiple personal loans?
If you’ve got multiple personal loans, you might find it a struggle to keep on top of them all. There are things you can do to help manage them.
1. Create a repayment plan
You know how much you have to pay back towards your personal loans, so budget for the repayments. Plan what your spending each month so that you know how much you can put towards clearing your debts.
2. Prioritise and set up automatic payments
Repaying your debts is a priority. Make sure you pay them first, before spending on other less important things like Netflix or gym memberships. Set up direct debits so that your loan repayments go out on the day your wages go in. That way you don’t have to think about making sure they’re paid.
3. Revisit your loan regularly
Check that you understand your loan’s terms and keep up to date with how much you owe. Seeing your debt reduce over time can encourage you to keep up with your repayments. You may find ways of paying extra amounts off to help them reduce quicker.
4. Always contact your lender in case of any difficulties
We can all fall on hard times when it’s least expected. If this happens, don’t ignore your loans. Get in touch with the different lenders and explain the situation you’re in. They’ll have ways of helping you while you try to get back on your feet. You can also get advice for free from Moneyhelper.
Final words
Although there’s no upper limit on how many personal loans that you can have, it’s important that you don’t over commit yourself. Work out what you can afford and whether the loan is necessary. Look at your credit score, your income, and your overall financial situation before taking out multiple loans.
Keep in mind that having multiple personal loans can be difficult to manage. They could also affect your chances of getting approved for new loans in the future.
Disclaimer: Please note, we are not providing financial advice. Our blogs are written for informational purposes only.