How Many Personal Loans Can You Have at Once?

How many personal loans can you have at once? While there is no technical limit to the number of personal loans you can carry, paying down more than one loan at once could come with some serious consequences. We take a hard look at when having multiple personal loans may be necessary and what the effects on your finances can be.

Back for More: Can You Have Multiple Loans at Once?

Personal loans offer longer terms, a fixed interest rate, and a predictable monthly payment—which are all good things if you are looking to manage your debt well and build financial stability. 

However, unforeseen needs, changing personal circumstances, and different loan terms can all result in situations where you need to take out two or more loans, and you are therefore paying down more than one loan at a time. Let’s take a look at how holding multiple loans works and how this is likely to affect your personal finances.

What Is a Personal Loan?

A personal loan is a lump sum lent to you by a bank or credit union. Personal loans can be for any amount and can be used for anything you please. Interest rates are usually fixed and terms are typically between two and seven years. Personal loans are also usually unsecured, so your property is not at risk.

Personal loans provide access to significant amounts of capital while offering:

• A fixed, predictable monthly payment
• Flexible repayment terms 
• Relatively low-interest rates
• Easy application and speedy approval processes

This makes personal loans a popular choice for financing major purchases, repaying unexpected expenses, and consolidating debt. For this reason, changing circumstances mean many people might find themselves in a situation where they are repaying more than one personal loan at a time. 

How Many Loans Can You Have?

There are no technical or legal limits to the number of personal loans you can carry at any time. Many lenders will be happy to consider extending you a second or even third loan, especially if you have already made steady progress on paying down your original loan and have a good history of making your payments on time.

That said, many lenders limit the amount they will extend in personal credit to a single borrower. This can be either a limit on the number of loans they will provide to a single individual or the total dollar amount they will lend. 

Of course, there is nothing stopping you from borrowing from different lenders, but each new creditor will usually want to check your existing financial obligations before extending more money.

Challenges of Holding Multiple Personal Loans

Personal loans are quick and easy to apply for, but it’s important to consider the implications of adding more borrowing to your portfolio. These include:

Multiple Payments

A simple payment schedule is one of the biggest advantages of consolidating credit card or other high-interest debt into a single personal loan. However, if you have more than one loan, you will need to make multiple payments each month and be certain you have the funds on hand to cover those payments. 

Inefficient Fees

Multiple loans mean you are duplicating any fees or charges that come with each additional loan, especially if these are rolled into your monthly payment. While you likely did not plan initially to carry multiple costs, it’s important to be aware that loan costs are duplicated.

Increased Debts

More loans, of course, also mean you have more debt. That also means coming up with more money every month to pay for things you have already bought. Debt not only eats up your available income, but it also limits your ability to build savings you will need in the future.

Lower Credit Score

While demonstrating that you can manage and pay down debt over time can help improve your credit record, taking out another personal loan will almost certainly lower your credit score. This will mean future borrowing from credit cards, auto loans, or a mortgage will cost you more over time. And, it’s possible that it may become more difficult for you to qualify for credit at all.

Additional loans affect your credit score in two ways:

• Multiple Hard Pulls: Every time you apply for a new personal loan, your lender will initiate a “hard pull” on your credit report, which lowers your credit score slightly. But if you are applying for new loans regularly, these repeated credit score drops can add up.
• Debt-to-Income (DTI) Ratio: One of the most common criteria in FICO® and other credit scoring systems is the ratio of your total debt to your available income. The more total debt you are carrying, the more this ratio will weigh negatively on your credit score. DTIs above 35% are considered a major red flag by many lenders, especially for unsecured debt.

When Do Multiple Loans Make Sense?

While not ideal, carrying multiple loans at the same time is not unusual. You might, for instance, have sensibly consolidated several credit card balances into a single loan. But then, you found you needed to spring for urgent repairs to keep your beloved German import on the road and make that crucial down payment to secure a wedding venue. 

In cases like this, additional debt may be unavoidable and another personal loan might be your best option.

Multiple personal loans can also make a lot of sense if they help you to:

• Avoid excessive credit card debt: Consolidating your existing card debt or taking out a loan to pay for a major purchase can help you avoid high-interest, variable card debt.
• Avoid revolving credit: Using a single lump sum to fund an unexpected expense can help avoid over-borrowing small amounts from a line of credit that then needs to be repaid at a higher annual percentage rate (APR).

Alternatives to Multiple Personal Loans

Let’s take a look at some of the most popular ways to avoid having to take out more than one personal loan at a time. These include:

Credit Cards

Using a credit card for smaller unexpected costs or necessary purchases that you can repay in a month or two may be easier and cheaper than taking out another long-term personal loan.

Lines of Credit

Lines of credit, typically secured by a property, allow you to borrow small amounts of money when you need it and pay it off over time. This can work better than a personal loan for smaller, ongoing costs like a major home renovation. But beware of over-borrowing and then failing to make more than minimum repayments.

Debt Consolidation

It might make sense to roll your existing debts, including personal loans, into a new or refinanced personal loan. This allows you to stick with a single, predictable APR to allow you to pay off your total debts faster.

Whether debt consolidation makes sense for you depends both on current interest rates and your credit score. If you are considering consolidating two or more personal loans or other debt into a new personal loan you should:

1. Figure out your maximum affordable monthly payment
2. Based on your monthly payment, determine how long your repayment schedule should be  
3. Check your credit score
4. Talk to your existing lender and others about your needs
5. Gather documents detailing your personal information, income, and existing debts
6. Apply for your loan
7. Pay your loan fees, accept your lump sum, and start making payments.

It’s also possible to consolidate multiple personal debts into a secured home equity loan, but you usually need to have very significant debt to justify the additional costs that go into this type of borrowing. Tapping your home equity to pay off shorter-term debt also reduces the stake you hold in your home in the long term.

Keep It Local With Partners Financial FCU

Existing partnerships and long-term relationships matter when it comes to managing personal borrowing, especially multiple personal loans and debt consolidation. Choosing a local credit union like Partners Financial FCU guarantees you’ll get incredible personal service, great rates, and lower fees and charges.

At Partners Financial FCU, we’ve been helping Richmond-area residents reach their financial goals for more than 60 years. With branches in downtown Richmond’s Federal Building, as well as in Glen Allen, Chesterfield, and Henrico County—we’re easy to find and always ready to talk.   

We work with our members to understand your dreams and challenges and determine the best way to manage debt for future success. We offer personal loans of up to $25,000 with:

• Competitive rates
• Fixed APRs and fixed payments
• Loan terms of up to six years
• No loan origination fees
• No prepayment penalties

Best of all, our loan decisions are made locally. To us, you’re a neighbor and a partner, not just a number in an algorithm. Stop in today to start the conversation or click below to learn more about our affordable, flexible personal loans.

SEE OUR PERSONAL LOAN OPTIONS & BENEFITS