Personal loans are essential tools that can help address your financial concerns. However, it can also cause serious problems if not properly managed. Unexpected circumstances can force you to apply for another loan even if you already have an existing one.
Can you apply for several personal loans at the same time?
There are no regulations in the United States or Canada that prohibit a borrower from taking out multiple personal loans during the same period. You can have several outstanding personal loans from the same or across numerous financial lenders. While most lenders don’t have an exact limit on the number of loans you can apply for, some companies will place a ceiling on the amount you can borrow.
The loan amount and number of personal loans you can be approved for will depend on several factors such as credit score, income, net worth, payment history, and any outstanding debt. Every lender has its own loan policies, and some require their clients to make several payments before applying for a second loan.
What should you consider before applying for multiple personal loans?
Even if you are capable of taking out several personal loans simultaneously, you must consider the following:
- Your credit score will significantly be affected.
Applying for another personal loan means another inquiry on your credit. Multiple hard inquiries can lead to a significant drop in your credit score. The more loans you have, the higher the chances of getting a low credit rating.
- Your payment commitments will increase.
Getting a second or third personal loan increases your monthly financial obligations. Even if your income is enough to cover your current monthly payments, your financial situation can suddenly change, and you may end up with an overwhelming amount of debt. The added monthly payment can also cause a strain on your household budget, especially if there’s no significant increase in your income.
- Your borrowing capability might be impacted.
Multiple personal loans can be a red flag to some financial lenders. Even if you did not encounter any issues during your second loan application, your ability to borrow money in the future may be negatively impacted. Overborrowing can cause financial stress to you and your loved ones, so make sure you weigh your options before taking out a second personal loan.
How can you increase your chances of getting approved for multiple personal loans?
While there are plenty of risks involved with applying for another loan, it does offer several financial benefits. To boost your chances of loan approval, make sure to follow these five tips:
- Check your credit report
Before applying, request a copy of your credit report to check for discrepancies. Report any irregularities to the credit bureau and make sure all issues are resolved before pursuing another personal loan.
- Increase your income
Finding another source of income can help balance your finances. Having a healthy cash flow will enable you to efficiently manage your monthly payments. The higher your income, the more confident financial lenders will be in approving your loan application.
- Reduce your outstanding debt
If you’re unable to find additional income sources, you should exert effort to reduce your overall debt. Try to pay as much as you can before taking out a second loan, and always pay your bills on time. Lowering your debt and staying on top of your payments can improve your credit score, increasing your chances of getting approved.
- Consider using collateral or adding a cosigner
Loan applications with collateral are more attractive to financial lenders. Collateral decreases the risk for lenders since they can use it to compensate for their financial losses if ever the borrower fails to repay their loan. If you don’t have an asset with recognizable value, another strategy is to add a cosigner to your loan. Find someone with an excellent credit rating and who is prepared to take over your payment obligations if ever you fall behind.
- Choose a trusted financial lender
Some financial lenders tend to be stringent with their lending requirements and criteria. To boost your odds of getting approved, choose a lending company that best suits your financial situation. Do your research and remember to conduct due diligence. Be wary of online scammers and only transact with licensed lenders such as My Canada Payday.
While it is possible to have multiple personal loans at once, you need to ensure that you’re fully prepared to handle the risks associated with this endeavor. Remember to weigh your options and only apply for a loan amount that you can realistically afford.