How Many Personal Loans Can You Have at Once?

A couple meets with a credit union representative to discuss how many personal loans they can have at once.

Personal loans can be advantageous for people who need an extra source of cash to pay for a necessary expense or another cost. While many people use personal loans for home renovations, weddings, medical bills, and debt consolidation, they can be used for virtually anything.

But personal loans can do more than help you access funds. When managed wisely, they can also help you improve your credit profile — either by helping you establish credit or improving your credit score.

While personal loans are often an excellent option due to their low rates when compared to credit cards, this isn’t always the case. Assessing your financial situation and goals can help you decide whether a personal loan is right for you.

However, you may also be in the position of wondering whether taking out multiple personal loans is even an option. Here’s a closer look at the question of how many personal loans you can have at one time.

Can You Take Out Multiple Personal Loans?

Theoretically, there is no hard and fast rule regarding how many personal loans you can have at a time. The answer to this question isn’t a straightforward one. It relies on several issues.

For starters, different lenders have different rules. Some institutions may allow you to take out multiple personal loans. Others may have rules against it or may have certain restrictions, such as waiting periods and other requirements. For example, you may need to have completed a specified number of on-time payments on an existing personal loan to be eligible for another.

If you can’t get multiple personal loans from the same lender, you also have the option of exploring different lenders. However, you will need to qualify for every personal loan you want to take out.

Getting Approved for Multiple Personal Loans

When you try to get approved for multiple personal loans, your chances of approval may come down to factors like your credit utilization ratio and debt-to-income ratio (DTI).

Credit Utilization Rate

Credit utilization ratio is a major contributing factor to your credit score. Also called debt-to-credit ratio, it measures the amount of available credit you’ve got within your credit limit. For example, if you have a total credit limit of $50,000 and your current balances add up to $25,000 then you’ve got a credit utilization ratio of 50%.

A general rule of thumb holds that your credit utilization rate should not exceed 30 percent, although keeping it within 10 percent is the best way to ensure access to the most favorable rates.

Debt-to-Income Ratio

When you apply for a personal loan, lenders also consider your debt-to-income ratio (DTI). This refers to the amount of debt you have compared to your total income. It is calculated by dividing your gross monthly income by all of your monthly debt payments. Lenders use this number to determine if you’ll be able to manage your monthly payments to repay your personal loan.

A higher DTI ratio is an indication that you may struggle with making payments. Typically, lenders consider a DTI of 36 percent or below a safe bet. However, they may make exceptions based on your credit history. Additionally, certain lenders — such as federal credit unions — may be more lenient when it comes to approval.

Every personal loan you take out has a direct impact on your DTI. In theory, you could take out multiple personal loans so long as you keep your DTI within an acceptable range.

The Pros and Cons of Taking Out Multiple Personal Loans

If you need additional cash beyond what’s provided by an existing personal loan, taking out additional personal loans can help. However, it’s also important to keep in mind that there are other potential downsides to taking out multiple personal loans.

The Cons

To begin with, when you apply for a personal loan, the lender conducts a hard credit check, which can lower your credit score. If this happens multiple times, the impact on your credit score — and your ability to borrow money — can become significant.

Additionally, the more personal loans you have, the higher the risk of missing a payment or defaulting on one or more of them. Because personal loans can be reported to credit reporting agencies, they can also have a detrimental impact on your credit score if you do miss a payment or default completely.

Finally, each personal loan you take out adds to your DTI, which can impact your ability to borrow for a mortgage, car, or other expense.

The Pros

On the flip side, every personal loan you take out is a long-term opportunity to build credit and improve your credit score. Every time you make a prompt payment, you position yourself for a potential credit score bump.

Taking out an additional personal loan can have a positive impact on your credit score if you use it for debt consolidation. On that note, many lenders don’t charge prepayment penalties. If you won’t be charged for paying off a personal loan early, you may have the option of consolidating multiple personal loans into one with a single payment. 

How Many Personal Loans: What Is Right for You?

The takeaway for borrowers considering taking out multiple personal loans? Under the right circumstances, doing so can be a beneficial strategy — as long as you research all your options, only borrow what you need, and are careful to make all of your monthly payments on time.

Speaking of researching your options, credit unions offer many benefits to borrowers, including higher approval rates, better fees and terms, and more personal service. Enter Baton Rouge Telco’s simple, flexible personal loan options.

Learn more about Baton Rouge Telco’s personal loans today!

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