Get a 2nd personal loan?

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Shortly after I paid off my personal loan, an email popped into my inbox. We want you back, it read.

The 4-sentence note:

  • Thanked me for paying off my loan. (As it was an experiment, I paid it off within days of receiving the cash.)
  • Let me know I’m eligible to apply for another loan. (So fast?)
  • Told me there would be “no impact” to my credit score. (Wait. What?)

Lending Club sent this email to me a month ago, and it’s left me figuratively scratching my head ever since. Is this all true?

I’ve asked the online lender repeatedly for comment on its email, but have received no response. That being said, lenders appear to have varying policies when it comes to repeat customers, but pretty similar ones when it comes to credit checks.

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“To confirm, there is ‘no impact’ to apply (or re-apply) because credit pulls are not marked as a ‘hard inquiry’ until the person originates the loan,” Remi Harrad, a spokeswoman for online lender Prosper Marketplace, told me in an emailed response to questions.

In other words, lenders (many of them, anyway) don’t perform the type of credit check at the time you apply for a loan that shows up on your credit report and can shave a few points off your credit score. They wait until the money is heading your way to make a hard inquiry.

If you get approved for a 2nd personal loan, expect another inquiry. Harrad says repeat borrowers could not qualify based on the original credit check, which is only good for 30 days.

Lending Club’s semantic vagueness aside, the tiny legalese posted below the warm invitation to borrow more money suggests this lender, too, will re-check credit: “All loans are subject to credit approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage, and credit history.”

When can you apply again?

A number of the big online lenders have explicit policies about borrowers opening multiple loans.

Lending Club, for example, says borrowers can have 2 “active” loans at the same time, according to the lender’s website. To qualify for a 2nd loan — whether or not a borrower has an open loan at the time — the borrower has to have made a year of on-time payments on the first loan.

There’s a caveat: “Sometimes we identify customers who are eligible for an additional loan before those 12 months and ask them to apply.” (That would be me, 2 weeks after I made my only payment.)

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Prosper borrowers must wait a minimum of 6 months after they receive their 1st loan before applying for another loan. The online lender also demands no late payments within the last 60 days on existing loans and 2 or fewer returned loan payments within the last 3 years.

Meanwhile, online lender Upstart says you can apply for a 2nd personal loan only if you have made your last 6 consecutive payments on time and owe no more than $50,000 on the existing loan. When applying for another loan after paying off an existing Upstart loan, the lender requires a 60-day “cooling-off period.”

Should you apply again?

Four months ago, I wrote that taking out a 2nd personal loan could be a red flag that your finances aren’t in good shape. Here’s why.

TransUnion — 1 of the 3 major credit bureaus — found that borrowers who open multiple personal loans are nearly as likely to increase credit card debt as they are to cut it. Since most personal loans are used for debt consolidation, adding to existing debt makes the act of consolidation fairly pointless.

“Those who repeatedly ‘go back to the well’ for these products do so, it would appear, due to constrained finances,” TransUnion researchers wrote. “We suggest that lenders be aware of repeated use of these loans, which may indicate consumers are trapped in a debt cycle, and consider alternative approaches to helping those consumers.”

If this is you, you don’t need another loan. You need help. Start with the National Foundation for Credit Counseling.

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