How many personal loans can you have at once? If you’re strapped for cash, this question might be at the forefront of your mind. This article explores various options that may be of interest to you, as well as some points to consider to avoid getting into trouble with your finances.
Many lenders will allow you to take out a second loan once you’ve repaid some of the first one and have shown that you can make your repayments on time.
LendingClub app, for example, may allow you to have two active personal loans at the same time, depending on specific factors. They will issue an invitation once they’ve determined whether you’re eligible.
Prosper app is another lender that will allow you to apply for a second loan after nine months and providing your credit score is at least 640 at the time of applying. Your existing loan must be in good standing, and the total loan amount for both loans must not exceed $40,000.
There’s nothing to stop you approaching different banks for two personal loans, however, bear in mind that if you apply for them both at the same time, each bank will run a credit check simultaneously. This may hurt your credit score and could affect your chances of securing borrowing.
The more debt you have, the trickier it will be to secure a second loan as your debt-to-income (DTI) ratio will increase.
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Payday loans are short-term loans that carry enormous interest rates. Individual state laws govern payday lending criteria, but generally, it’s not that easy to get a second payday loan without paying off the first.
Just one payday loan can be burdensome, so if you have another one, you may find yourself struggling to repay and end up in a vicious cycle of debt. Lenders will see your request as risky as it will look like you’re not managing your finances very well. If you’re struggling to pay back your original payday loan, it’s worth speaking to your lender to see if you can get an extension, rather than trying to get another one to pay it off.
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Multiple home loans can be useful if you want to make some home improvements or consolidate other debts. You may be able to apply for a home equity loan, alongside your mortgage. However, there are some factors to consider.
Firstly, you must have a good credit score. For example, U.S. Bank requires that borrowers have a FICO score of 730 to apply for a home equity loan.
Secondly, your home must have enough equity in it for even one home equity loan to be possible. The more equity your home has, the more options will be available to you. Lenders will consider your loan-to-value (LTV) ratio when determining how much you can borrow. According to the Federal Trade Commission, the amount you can borrow is usually limited to 85% of the equity in your home.
You may prefer to explore a home equity line of credit (HELOC) as opposed to a home equity loan. With the former, you can draw funds as needed and only make payments on the amount you borrow.
A drawback of home financing is that it will be secured against your property. This means that if you fail to make your repayments, you may be forced to sell your home. Moreover, if your home’s value decreases, you may fall into negative equity and owe more in debt than your home is worth.
Getting yourself into more debt on top of what you already owe is generally unadvisable. Extra borrowing means an increase in your monthly repayments and additional interest payments means that you’ll be lining your bank’s pocket more than your own. More debt will have an impact on the overall length of time you stay in debt for too, unless you decide to make overpayments.
If you do need to source another loan, avoid overborrowing if possible; only borrow the amount that you need rather than a bit extra just in case.
*The details presented in this article are correct at the time of publishing.