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How soon after paying off my last personal loan can I get another loan?

How soon after paying off my last personal loan can I get another loan?

You’ve reached the final lap of your personal loan and can see the finish line only a few repayments away. However, whether due to an unexpected bill, urgent repair, need for a new car or you just want to go on a holiday, you’ve realised you want another personal loan.

So, can you take out a personal loan while you’re still paying one off? Or how soon after paying off your last personal loan can you apply for a new personal loan? Let’s explore these scenarios below.

Qualifying for a personal loan

To understand how soon you can apply for a new personal loan it’s important to know how to best boost your chances of being approved for the loan.

Depending on the lender, a personal loan provider may not necessarily mind that you currently have a personal loan, or have just finished paying one off, before you apply – if you meet their eligibility criteria and can responsibly service the loan.

Essentially, a personal loan lender will assess your chances of approval through a few key factors. All of which serve to determine whether you can afford to service the loan, meaning you can afford to make repayments.

These key factors for personal loan assessment include:

  • Personal identification showing you are over the age of 18 and an Australian citizen or permanent resident,
  • Good to excellent credit history,
  • Proof of income (payslips, tax returns),
  • Details of expenses (bank statements, rental logs, mortgage repayments), and
  • Details of assets (property, shares etc.).

A personal loan lender will analyse the amount you wish to borrow against your income and your expenses and liabilities. An existing personal loan would fall into the latter category. If you were currently repaying a personal loan and the lender calculated that you may not be able to service an additional loan and its repayments, then your application may be rejected.

If you had just finished paying off a personal loan, a lender may not hesitate to approve you for a new personal loan assuming you met the above criteria. However, any debt you take on will show in your credit history. Having frequent credit listings in your history may appear risky to some lenders, especially if you’ve had issues making repayments on time. And multiple applications at one time can seriously hurt your credit score.

When should you wait before applying for a new personal loan?

A lender may choose to approve you for a new personal loan right after paying off an existing personal loan at their own discretion based on your individual financial situation. But there are some circumstances in which you may want to consider holding off.

  1. Your finances have decreased. Just because you were approved for one loan of a certain amount of funds doesn’t mean a lender has to do so again, especially if your circumstances have changed. A job loss or a decrease in household income may affect your application. Consider waiting until your income has increased again, or potentially apply for a smaller loan amount to boost your chances of approval.
  2. You’ve started a new job. Getting a new job is always exciting, but even with an increase in income, it may affect your chances of personal loan approval. Lenders look for stability in your finances and being employed with one company, or in the one role, for at least 3-6 months may improve your chances. If you’ve just started a new job, it may be worth waiting until your probation period is over at least until you apply for your new personal loan.
  3. Your credit score could be better. Whether you’ve closed a credit card account or experienced an adverse event, changes to your credit history can impact your chances of personal loan approval. While some lenders may offer personal loans to Aussies with poor credit history, a good to excellent credit score is preferable. If you’ve just paid off a personal loan, then the chances are this positive event might boost your credit score. It may be worth waiting until this is reflected in your credit history and credit score before applying. And if you need a helping hand increasing your credit score, read our guide.

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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