Working hard in order to earn enough money to provide for food and shelter for your family is a fulfilling yet exhausting task for many fathers across the US.
And as if that was not difficult enough, you also need to have some knowledge about the lending market. Even though at first you might be reluctant to learn about different types of loans, this is necessary ‒ from time to time, you will need to get a loan for some reason.
You probably already know how getting a debt consolidation loan can help you improve your credit score. This strategy has proved to be rather useful for many people who found themselves stuck in debt.
But do you know how many loans you can have at the same time? Multiple loans are most frequently taken when people underestimate the actual costs for an event they are organizing or a purchase they need to make.
If this happened to you, you are probably thinking of taking another loan before you have fully repaid the existing one. Read on to find out about your options and make the right decision.
Can I Take Multiple Personal Loans at the Same Time?
You will probably be exhilarated when you find out that the answer is yes. You can take a second loan when you have paid off a part of the initial balance and have a proven record of timely repayments.
However, whether or not you can take multiple loans is not so important as whether or not you should take them.
First, when you are already repaying a loan, it is very likely that you will not get the best deal on the next loan. This is because both your credit score will decrease and your debt-to-income ratio will increase because of your first loan, which is a signal for lenders that you are a risky borrower.
Also, overborrowing is another reason to reconsider taking another loan. A second loan will increase your monthly payments and the total cost of your loan, which will make it much more difficult for you to pay it down. And you don’t want to become dependent on loans since this is a sure way to get into a debt cycle.
If you want to apply for multiple loans at the same time, this could damage your credit score because lenders will perform a credit check. Depending on how far you get in each application process, the type of loans and how much time passes between two applications, your score will be affected to a higher or lower degree.
However, if you just want to compare rates, you can fill out a pre-approval application to see what kind of loan you can actually get. In this case, lenders use a soft credit pull, which will not affect your credit score.
What Should You Consider Before Applying for Another Loan?
- Getting a loan and taking on debt can be useful but only if you do it in moderation. If you manage to make consistent and timely repayments, you can improve your credit score.
However, if you have a number of inquiries on your credit report or have a lot of debt, lenders will not see you as their first choice.
- Moreover, if you use personal loans to cover nothing but your personal expenses, this probably means that you are in a debt cycle. In this case, search for debt relief or another type of financial service.
It is important to honestly assess whether you really need another loan as well as what you need the money for.
- If you need a loan, decide what kind of loan you need. Not all loans are created equal and we recommend that you stay away from payday loans. Therefore, do your research before applying for one.
- Check your credit report for any mistakes. If there are any, make sure they are fixed prior to applying for a loan.
- Make the repayments on your existing loan on time. This will considerably increase your credit rating or lower it if you miss a payment.
- Pay off as much debt as possible. This will increase your credit score and decrease your debt-to-income ratio, thus improving the likelihood of getting approved for the next loan.
- How much can you afford to pay? Be honest with yourself when it comes to the amount of monthly repayments that you can afford so that you can choose the right loan.
- What is the best loan for you? If you really need a personal loan, our advice is to take some time and shop around. As a part of this process, take a look at the list of the best personal loans for 2018.
When Can You Apply Again?
There is no single rule as to when you can apply for another loan. This will mostly depend on the lender and their policies.
Lending Club requires borrowers to have a year of timely payments on their first loan regardless whether they have an open loan at the time of application.
Prosper will give loans to people who have taken their first loan at least 6 months before applying for the second one. They also demand no late payments within last 60 days on your current loans as well as 2 or fewer returned loan payments within last 3 years.
Upstart will approve your loan if your total debt on the existing loan is no more than $50,000 and you have made your last 6 consecutive payments on time.
Hopefully, now you realize that you shouldn’t ask if it is possible to have more loans at the same time. Instead, ask yourself whether you really need another loan, what your credit score is, whether you can afford another loan without getting into a debt cycle and so on.
Once you answer all these questions, you will know what to do. In case you decide to take another loan, make sure you check your credit for any errors. Finally, shop around and compare offers from different lenders. This will help you find the best loan to suit your needs.