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Key takeaways

  • Taking out multiple bad credit loans can lead to cash flow problems due to high interest rates and fees.
  • Applying for multiple loans can temporarily lower your credit score because of hard credit checks.
  • Alternatives to multiple bad credit loans include secured credit cards, government or nonprofit financial assistance and loans from close friends or family members.

Taking out multiple bad credit loans may sound like a viable solution to a financial issue, but it could make matters worse. While you technically can take out multiple bad credit loans, it’s not the best financial move for everyone, especially if you’re having a hard time organizing your existing debts. Applying for a loan can also temporarily lower your credit score due to the hard credit check — and if you apply for several loans in a short amount of time, it can have a bigger impact.

The more you borrow, the more likely it is to get trapped in a debt cycle that can quickly lead to financial hardship down the road. Before you apply, consider potential alternatives and how another loan will affect your financial health.

Should I take out multiple bad credit loans?

Whether you should take out multiple bad credit loans depends on your ability to repay the loans and why you’re considering borrowing more. If you are considering taking out multiple loans, you should fully evaluate your financial situation first. Understand how much debt you already have, how much income you have each month and what your debt-to-income ratio is.

If your current debt load is too high and you are having trouble making payments, adding more debt may not be the best solution. Spreading yourself too thin financially can lead to problems down the road, including missed payments that can lead to further credit damage.

That being said, it may be more beneficial to concentrate on improving your credit before applying for another loan. If you need the funds on the fly and don’t have the time to improve your credit, consider alternatives first. But if you’re set on taking out another loan, be positive that you can make the monthly payments, both in the short and long term.

When to consider a consolidation loan

For individuals having trouble making loan payments, a consolidation loan may be a more attractive option. A consolidation loan can help make loan payments more manageable by combining your debt into a single, potentially lower, payment. However, there are several considerations to make before applying for another loan, including:

  • The amount of debt you’re already juggling and if it can all be consolidated.
  • Your monthly budget and if it allows the reworked payment.
  • Your current credit score and repayment history.
  • What interest rates and fees you prequalify for.
  • How much interest would add to the total cost of the loan.

Keep in mind that having a debt-to-income ratio above 36 percent can make it difficult to be approved for a loan.

Those with low credit are also more likely to be offered higher origination fees and higher interest rates than those with good to excellent credit, who are more likely to be offered the lender’s most competitive rates and lowest fees.

How to improve your chances of getting another loan

If you have a poor credit score and need a loan, you should research lenders to find the most affordable option and ask how you can increase your chances of qualifying. While every lender is different, there are a few ways to increase your chances of getting approved across the board.

  • Pay off existing debts. Taking on a loan can increase your debt-to-income ratio and put a strain on your budget. Before considering another loan, see if you have it in the budget to pay down any existing debts or consider taking out a debt consolidation loan to further simplify your existing loan payments.
  • Prequalify. If you want to avoid a negative impact on your credit, look for lenders that offer prequalification. This allows you to assess your eligibility and receive rate quotes without affecting your credit score.
  • Work on building or repairing your credit. Repairing your credit before applying for a loan can help you avoid being denied due to a low credit score and can increase your chances of scoring a more competitive rate.
  • Consider a secured personal loan. If you are having difficulty obtaining an unsecured loan you should consider applying for a secured personal loan, which is generally easier to get approved for because the balance is backed by collateral.

Alternatives to multiple bad credit loans

It is important to remain cautious when taking out multiple bad credit loans, as this can have negative consequences for your credit and financial health in the long run. However, if you absolutely need access to more funds but don’t qualify for — or want to — take out another loan, then you have a few options.

  • Consider a secured credit card or one geared toward those with low credit. While these cards will likely come with high interest rates, they’re a way to get the funds you need, when you need them.
  • Apply for assistance from the government or local or national nonprofit organizations. It may take time to qualify and receive funds, and you may need to show proof of financial hardship.
  • Ask a close friend or family member if they’d be willing to lend you the funds — just make sure you have a clear repayment plan in writing and stick to it to avoid damaging your relationship.

While the alternatives aren’t extremely plentiful, it’s best to investigate every single option to avoid possibly putting yourself in a financial hole by borrowing a large amount of high-interest debt.

Bottom line

Technically speaking, you can take out as many loans as you’d like, but that often isn’t the best option. Between keeping up with multiple payments to the impact on your debt-to-income ratio, taking on more debt with already shaky credit can increase your risk of further damaging your score.

If absolutely necessary, you can take out multiple bad credit loans with different lenders, but make sure to avoid high-interest loans, like no credit check loans including payday loans. These types of loans are more likely to approve borrowers on the lower end of the credit spectrum, so make sure you read the terms and conditions carefully before applying for a bad credit loan to know exactly what you’re signing up for.