Can You Take Out a Second Personal Loan?

Laveta Brigham

There are many unexpected life events that can trigger the need to take out multiple personal loans at once. Personal loans are often used to consolidate other debts or make large purchases. But when you already have one personal loan and find yourself in a situation where you need another, […]

There are many unexpected life events that can trigger the need to take out multiple personal loans at once. Personal loans are often used to consolidate other debts or make large purchases. But when you already have one personal loan and find yourself in a situation where you need another, what should you do? How many personal loans can you have at once?

The short answer is that you can take out more than one personal loan simultaneously. But just because you can doesn’t mean you should, as it can seriously impact your credit score and overall financial health.

Can I take out two personal loans at the same time?

The ability to take out multiple personal loans depends on the individual lender. A number of the big online lenders have explicit policies about borrowers applying for multiple personal loans.

LendingClub, for example, says that borrowers can have two “active” loans from the lender at the same time. To qualify for a second loan, the combined maximum outstanding loan amount cannot exceed $40,000, and you must have made three to 12 months’ worth of consecutive on-time payments on your existing loan.

Prosper borrowers must wait a minimum of nine months after they receive their first loan before applying for another loan. There is also a combined maximum balance of $40,000.

Meanwhile, online lender Upstart says that you can apply for a second personal loan only if you have made your last six consecutive payments on time and owe no more than $50,000 on the existing loan. When applying for another loan after paying off an existing Upstart loan, the lender requires a 60-day “cooling-off period.”

Things to consider before getting another loan

The benefits of taking out a second personal loan depend entirely on the circumstances. You should never take on more debt than absolutely needed. However, even the best financial planners can’t always predict life events that impact your finances. Before taking on your second personal loan, consider the following drawbacks.

You risk falling into a debt cycle

Be careful of falling victim to a debt cycle where you are perpetually taking out additional personal loans and digging yourself into a financial hole. This can be one drawback of getting another loan. If you find yourself frequently taking out new personal loans, it might be time to examine your finances. Look at your monthly income and expenses and decide if there are fundamental changes you could make that would put you in a better financial situation.

Your credit score will be affected

Another major downside to taking out multiple loans is the effect it has on your credit score. Inquiries on your credit report usually cause a small drop in your credit score. This drop might not appear right away, but it will appear soon after you officially apply for the loan. If you get approved for a second personal loan, expect another inquiry.

Does it make sense to have multiple personal loans?

Even if you think you’re eligible for multiple loans, you should think twice before applying. Taking out a second personal loan could be a red flag that your finances aren’t in good shape. If you use a personal loan to consolidate and pay off credit card debt, that could be a good thing. However, if you rack up credit card bills a second time, enough to warrant a second personal loan, the problem could lie with your spending habits or budget.

How to manage multiple personal loans

Defaults and late payments on personal loans affect your credit more than defaults and delinquencies on credit cards. So if you are in a situation where you have to make tough choices about which bills to pay, prioritize the payments on your personal loans first.

Another thing that you’ll want to do to manage multiple personal loans is to identify which loan you could funnel extra payments into. This could be the loan with the smallest principal amount of the loan with the highest interest rate. If you pay off that loan early, you will save money in interest and can use the monthly amount you were paying on the loan and channel it toward your other debts or into an emergency fund.

Alternatives to another personal loan

Before taking out a second personal loan, consider these alternatives:

  • Dedicated savings account: If the expense that you are considering can be delayed, you may be better off by avoiding another personal loan and saving up the money to pay for it instead.
  • Debt consolidation loan: Instead of taking out multiple personal loans, you may consider wrapping your existing loan and any additional credit card debt into a single debt consolidation loan.
  • Balance transfer credit card: You may be eligible for a balance transfer on a new or existing credit card. Many credit cards offer an introductory period with a 0 percent APR on new purchases and/or transfers, so you can begin paying off debt without additional interest costs.
  • Payment plan: If you are considering a second personal loan to pay a large medical bill, check with your provider to see if it offers a payment plan.

Get pre-qualified

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

The bottom line

How many personal loans can you have? While it’s certainly possible to open more than one loan at a time, this should really only be done in a dire financial situation in which the benefits outweigh the risks.

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