Taking out a personal loan can provide the flexibility you need to cover planned and unplanned expenses without breaking your budget. Low interest rates and quick access to the funds might have you wondering how many personal loans you can have at once.
Read on to find out if multiple personal loans make sense for your financial situation.
How Personal Loans Work
If you’re looking to get a personal loan, you can complete a simple application and get approval within a few days. Once you’re approved, your funds are transferred into your checking or savings account. It’s your choice how to spend the money but you’ll begin the repayment process right away.
Personal loan terms vary between lenders and may range from one to seven years. Best Reward offers a maximum loan term of 48 months to keep your borrowing costs down. You can get a lower monthly payment if you choose a longer loan term, but this will likely come with a higher annual percentage rate (APR).
Making on-time payments can help you build a positive credit history as your repayment history will be reported to the credit bureaus.
How Many Personal Loans Can You Have at One Time?
Here at Best Reward, there isn’t a maximum number of how many personal loans you can have at once. However, we do have a maximum total loan amount of $15,000 so our members don't take on more debt than needed.
If you find yourself in a situation where you need a second personal loan, try to apply with the same lender. Applying for multiple loans with different lenders requires multiple credit inquiries that can affect your overall credit score.
Factors That Affect Multiple Loan Approvals
The application process for a second personal loan is likely to follow the same process as when you took out your first loan. Because you already know what lenders look at to decide on your approval, you can understand if it's a good idea to have multiple loans.
Make sure you know the specifics of the following:
Your Credit Utilization
Credit utilization is the ratio of your total available credit to your total debt. This debt-to-credit ratio makes up 30 percent of your credit score so it’s a good idea to keep your available credit as high as possible.
Taking out additional personal loans increases your debt and lowers available credit, which means a higher credit utilization ratio. This could affect your overall credit score and, in turn, increase the rate you're offered for the amount of money you need to borrow.
Your Debt to Income Ratio (DTI)
Your DTI will be factored into any decision for extending a loan. This is the sum of all of your monthly debt payments divided by your monthly gross income. Each lender will have different criteria for the maximum allowable DTI for a personal loan.
If you already have one (or multiple) other loans, consider if adding another personal loan payment might stretch your finances and budget too thin.
Your Credit Report
Your credit report has all your current debt information and payment histories. If you’ve missed payments or opened up a new credit account, this will also show up on your report. Since this is the information lenders use to decide whether to lend you money, make sure your report is accurate before applying for credit.
Lenders use your credit report to decide whether to approve you for a loan. Too much debt can hurt your credit score, but if your score is strong a lender may see you as a good candidate to take out another personal loan.
Alternatives to Personal Loans
If you decide a personal loan isn’t the best option for your current financial situation, you have other financial tools to consider!
Credit cards are a revolving line of credit which means your available credit resets monthly. Unlike personal loans, you have a faster repayment period and typically higher interest rates. This can be a good alternative if you don’t need a large loan amount.
Home Equity Loans
If you’re a current homeowner, home equity loans may offer lower rates and longer terms than a personal loan. But keep in mind that your home is used as collateral if you're unable to pay.
Personal Loan Refinance
You may also consider refinancing an existing personal loan to a larger amount. That way, you don't have multiple payments but gain access to more funds.
Apply Today With Best Reward
You can have multiple personal loans at once to use however you want! Whether you use the funds for a wedding, home improvements, or education expenses — make sure you have a strong repayment strategy. This will help you avoid late payments so you continue to build a strong credit history.
Click below to find out more about the benefits of personal loans from Best Reward!