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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Fact Checked -

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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Learn more about personal loans

What is a personal loan?

A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan. However, the process is easier and faster than taking out a mortgage.

Loan sizes typically range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.

What is a bad credit personal loan?

A bad credit personal loan is a personal loan designed for somebody with a bad credit history. This type of personal loan has higher interest rates than regular personal loans as well as higher fees.

Does refinancing a personal loan hurt your credit score?

Personal loan refinancing means taking out a new loan with more desirable terms in order to access a more competitive interest rate, longer loan term, better features, or even to consolidate debts.

In some situations, refinancing a personal loan can improve your credit score, while in others, it may have a negative impact. If you refinance multiple loans by consolidating these into one loan, it could improve your credit score as you’ll have only one outstanding debt liability. Your credit may also improve if you consistently pay the instalments on time.

However, applying to refinance with multiple lenders could negatively affect your credit if your applications are rejected. Also, if you delay or default the repayment, your credit score reduces.

Can you refinance a $5000 personal loan?

Much like home loans, many personal loans can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

How long does it take to get a student personal loan?

Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or, in some cases, the same day.

How can I get a $3000 loan approved?

Responsible lenders don’t have guaranteed approval for personal loans and medium amount loans, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.

Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income. Centrelink payments may not count, so you should check with the lender prior to making an application.

Can I merge my personal loan with my home loan?

Yes, you can refinance your home loan and, in the process, merge or consolidate your personal loan and home loan. By doing so, you can lower the number of debts you have, and you may also reduce the total interest you have to pay.

However, you should consult a financial advisor or a mortgage broker to confirm that you are decreasing your total outstanding debt, including interest payments. The repayment term for a home loan can be much longer than that for a personal loan, and by merging the two, you could be repaying a higher amount over the full term.

Can I get a bad credit personal loan with a guarantor?

Some lenders will consider personal loan applications from a borrower with bad credit if the borrower has a family member with good credit willing to guarantee the loan (a guarantor).

If the borrower fails to pay back their personal loan, it will be their guarantor’s responsibility to cover the repayments.

Is a personal loan a variable or fixed-rate loan?

Depending on the personal loan lender, you may be able to choose between a fixed and a variable interest rate. But, there are a few distinct differences between the two, so it’s important to weigh up the pros and cons before deciding on what’s right for you.

A fixed interest rate loan gets you the convenience of knowing exactly how much you need to repay each fortnight or month. On the other hand, you generally won’t be able to make lump sum or advanced payments to close your personal loan early - or at least not without a penalty.

With a variable interest rate personal loan, you may be able to get a longer loan repayment term, with the option of paying off the loan early. You typically won’t need to pay any additional charges for an early full repayment either. The potential disadvantage with an interest rate that can change is that your repayment is not entirely predictable, as it can fluctuate with the market. However, you’ll likely have more options as more lenders offer a variable interest rate personal loan.

How much can you borrow with a bad credit personal loan?

Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans, they also get loaned less money. Each lender has its own policies and loan limits, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.

Can I get guaranteed approval for a bad credit personal loan?

Few, if any, lenders would be willing to give guaranteed approval for a bad credit personal loan. Borrowers with bad credit histories can have more complicated financial circumstances than other borrowers, so lenders will want time to study your application. 

It’s all about risk. When someone applies for a personal loan, the lender evaluates how likely that borrower would be to repay the money. Lenders are more willing to give personal loans to borrowers with good credit than bad credit because there’s a higher likelihood that the personal loan will be repaid. 

So a borrower with good credit is more likely to have a loan approved and to be approved faster, while a borrower with bad credit is less likely to have a loan approved and, if they are approved, may be approved slower.

Can I repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to make extra repayments onto your personal loan or medium amount loan could help reduce the total interest you’re charged on your loan, or help clear your debt ahead of schedule.

Check your loan’s terms and conditions before paying extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

Should I get a fixed or variable personal loan?

Fixed personal loans keep your interest rate the same for the full loan term, while interest rates on variable personal loans may be raised or lowered during your loan term.

A fixed rate personal loan keeps your repayments consistent, which can help keep your budgeting consistent. You won't have to worry about higher repayments if your rates were to rise. However, on a fixed loan you’ll also potentially miss out on more affordable repayments if variable rates were to fall.

Can unemployed single parents get personal loans?

It can be more difficult for unemployed borrowers to successfully apply for a personal loan. Most lenders require borrowers to have a regular income available to cover the cost of loan repayments.

If you’re self-employed, or if less than half of your income comes from Centrelink, you may not be eligible for some personal loan options. Consider contacting the lender before applying.