For many reasons, consumers borrow a personal loan. The convenience of borrowing a loan online makes it all more attractive. But often we are hit by a question – how many personal loans can we have at once? Is it possible to have multiple personal loans? Let us learn about it in detail. ⭐Personal Loan ⭐Debt Management
From tapping on to our emergency funds to using our credit cards fully – we take help of everything available when we are short of funds. Yet, personal loans are considered to be one of the popular forms of borrowing money. Most of the people opt for a personal loan because they are unsecured. The borrower is not required to offer something of value to get a personal loan.
Undoubtedly, this may take you out of financial trouble, but is it possible to have more than one personal loan at once? Yes. It is possible to have more than one personal loan at once. Some lenders allow you to borrow more than one personal loan from them or you can have multiple loans from different lenders. If you want to borrow money from your existing lender, there’s a fair chance that they’ll demand you to terminate your first loan and get a new loan. Although it is possible to apply for multiple personal loans at the same time, it may impact your credit score and your chances of obtaining a loan in the future.
You can borrow multiple loans, but here’s why you shouldn’t
Situations may arise where you need to take out a personal loan. However, sometimes a single loan may not cover all your needs. And that may force you to contact your lender to get another loan. Nonetheless, be mindful that various loan providers have different restrictions. Some may reject your request outright, whilst others enforce certain conditions. Here are a few things you must consider before taking out multiple loans:
1. Financial obligations increase
It is obvious that if you have multiple loans, you will have to make multiple repayments too. You may lose a major chunk of your income in debt repayment every month. Also, this will add to your financial burden as you have to keep up with the repayments unfailingly to protect your score. The risk of defaulting on loans also increases. You will have a little left every month for savings and investments.
2. Impact on credit score
When you borrow a loan, you are financially and legally liable to make all the repayments on time. If you somehow miss the repayment dates, it will impact your credit score. A bad credit score will always make it difficult for you to get a loan in the future with good APR and interest rates. Lenders assess your credit profile before offering you any loan. So, if you apply to different lenders for a different personal loan, multiple credit checks will be performed on your credit report. This will significantly reduce your rating making it harder for you to find a personal loan at low APR.
3. Debt accumulation
Remember that whenever you are borrowing a loan, you’re taking out a debt that needs to be repaid within a certain period. So, the more loans you take, the more debt you accumulate. This means your monthly repayment amounts are going to be higher. It will also increase the debt-to-income ratio. A low ratio indicates a good balance between debt and your income. If your debt-to-income ratio increases, lenders will consider that you have way too much debt for the income.
How to manage multiple personal loans?
If you have two or more unsecured personal loans, prepare a sound repayment plan. It will help you to avoid late payments and other possible complications. Be a responsible borrower and create a systematic repayment plan. One of the best ways to avoid late payments is to set up automated bill pay. Usually, you can do so through the bank’s bill payment program.
Multiple loans will have multiple repayment dates. That may lead to confusion and there is a chance that you may miss the repayment dates. Autopay works best for those who have difficulty remembering to pay their bills right before the due date or after getting a late note. Most of the lenders allow automatic payments.
Some people like to set out one day a week or month to pay their bills, while others like to set up calendar alerts for payment due dates. The goal will be to formulate a strategy that fits better for your personal finance.
Borrow money smartly and responsibly
Many people consider personal loans to be a better option for borrowing money as compared to a credit card. Even if this financial product has numerous benefits that you can enjoy, it comes with a cost. Keep your borrowing habits in check and eliminate unnecessary debts. Here are a few tips to help you become a responsible borrower:
· Gauge your affordability
You may not be approved for a loan with monthly repayments that you cannot afford. Having an idea of how much you can pay and how much your loan costs can help you find the right loan for your financial situation. Knowing your affordability before you apply for a loan is one of the most important financial assessments.
· On-time repayments
Your payment history plays a significant role in your credit score. Paying all of your payments on time is likely to increase your credit rating. And remember that skipping any of the repayments will cause it to sink deeper. Should you miss the repayment dates continuously, you will be issued with a County Court Judgement (CCJ).
· Compare multiple loan offers
If you’re planning to get a personal loan, research and explore multiple offers before settling down for one. By doing so you have a great chance to find the lowest APR available for the personal loan. While comparing, take into consideration the APR and not only the interest rates. You can compare multiple offers here without hurting your credit score.
Personal loans can be a long-term financial commitment if you are taking out a loan for a longer period. If you are sure that you can afford all the repayments if you take multiple loans, ensure that you shop around. The major obstacle that you may find is to qualify for all the loans. As lenders will assess your credit report and so many existing loans may make it difficult for the approval. However, if you have a repayment plan backed up by hefty monthly income – then you do stand a chance for loan approval.