Can I have two personal loans at the same time?

Can I have two personal loans at the same time?

No matter how much of a forward planner you are, there can be times when your financial needs change seemingly overnight.

Perhaps you’re currently paying off a personal loan you took out to update your kitchen, but you’ve just been hit with some expensive, unexpected vet bills. Or maybe you jumped the gun when taking out a loan for your wedding and forgot to factor in some important costs.

Whatever the circumstances may be, the question you might have is: can I take out a second personal loan?

While the answer to this differs from one lender to the next, in many cases it is possible to have two personal loans at the same time – but that doesn’t necessarily mean it’s your best option.

What should I consider before applying for a second personal loan?

Before you jump straight into comparing and applying for an additional personal loan, it’s important to understand the implications it could have on your finances and decide whether it’s the right choice for you.

Your options may be more limited

When you take out a second personal loan, you may be in a less advantageous financial position than when you took out your first. That’s because when you applied for your first personal loan, you presumably had one less debt than you do now.

This means that your debt-to-income ratio (DTI) is now likely higher. A debt-to-income ratio is the percentage of a borrower’s gross monthly income that goes towards monthly debt repayments.

Borrowers with lower DTI ratios are more likely to have access to more competitive loans than those with higher DTI ratios. The reason being is that banks and lenders see borrowers with higher DTI ratios as being at greater risk of defaulting on their loan.

This generally means that you may not get as good a deal on your second personal loan as you did on your first.

It’s also worth noting that not all lenders will allow you to have more than one personal loan, so you may have to shop around to find one that will.

Your credit score may take a hit

Every loan application you submit will appear on your credit report, which can be accessed by every bank and lender you want to borrow from. Having multiple loan applications recorded on your credit history in close succession is generally not ideal from a lender’s point of view, as it could suggest that you are at risk of getting into a debt cycle.

This may not necessarily be a deal breaker if you have otherwise excellent credit behaviour, such as always making your repayments on time and never defaulting, but it could have an effect on the quality of loans you may be approved for in future.

Of particular importance is if you plan to apply for a much larger loan, such as a home loan, in the not-too-distant future. Consider prioritising this above applying for a second personal loan, if possible, to potentially give yourself a greater chance of accessing the most competitive home loans available.

Your budget may be stretched

Taking on a second personal loan means making an extra repayment each month. Even if you borrow less on your second loan, and your repayments are lower than your first, it could still put a strain on your finances.

As you should before you apply for any financial product, be sure to carefully assess your budget to calculate whether your new loan repayments will fit in comfortably with your existing expenses and liabilities. You might like to make use of RateCity’s Personal Loan Calculator to get a repayment estimate.

Lessening your risk of overborrowing is important in order to protect your credit score and avoid financial strain.

What are the alternatives to taking out another personal loan?

Remember that taking out a second personal loan needn’t be your only or best financing option. Depending on the amount you wish to borrow, the length of time it takes for you to pay it back, along with a number of other factors, there could potentially be an alternative option better suited to you.

Some possible alternatives include:

  • Credit card: If the amount you want to borrow is on the smaller end of the scale, then a credit card could potentially be an option for you – just keep in mind that they tend to have higher interest rates than personal loans if you don’t pay it back in full on time.
  • Line of credit: Similar to a credit card, a line of credit is a flexible loan with a predetermined borrowing limit that you can access as needed. It is often secured against your property or another large asset. If you’re not sure exactly how much you need to borrow, this could be an accommodating alternative to a loan.
  • Overdraft: An overdraft can be accessed through your bank account once all available funds have been used. It provides similar flexibility to a line of credit, but you will typically be charged a fee for every transaction, additional to interest charges.
  • Refinance to larger loan: Some banks and lenders may allow you to refinance to a larger loan amount in order to access more money without having to take on a second/separate debt.

Bear in mind that any sort of credit is a serious financial commitment that can take months or years to repay. Consider talking to a financial advisor for information specific to your personal situation.

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Fact Checked -

This article was reviewed by Finance Writer Alison Cheung before it was published as part of RateCity's Fact Check process.

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Learn more about personal loans

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.

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.

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.

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.

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.

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.

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 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 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.

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.

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.

Are there alternatives to $2000 loans?

If you need to borrow $2000 or less, alternatives to getting a personal loan or payday loan include using a credit card or the redraw facility of your home, car or personal loan.

Before you borrow $2000 on a credit card, remember that interest will continue being charged on what you owe until you clear your credit card balance. To minimise your interest, consider prioritising paying off your credit card.

Before you draw down $2000 in extra repayments from your home, car or personal loan using a redraw facility, note that fees and charges may apply, and drawing money from your loan may mean your loan will take longer to repay, costing you more in total interest.

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.

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.