Can you take out a second personal loan?

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There are many unexpected life events that can trigger the desire to take out multiple personal loans at once. Personal loans are often used to consolidate other debts or make large purchases. But when you already have one personal loan and find yourself in a situation where you need another, what should you do? How many personal loans can you have at once?

The short answer is that yes, you can take out more than one personal loan simultaneously. But just because you can doesn’t mean you should, as it can seriously impact your credit score and overall financial health.

Get pre-qualified

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

Can I take out two personal loans at the same time?

So you want to know, “Can I get a loan if I already have one out?” This really depends on the individual lender. A number of the big online lenders have explicit policies about borrowers opening multiple loans.

Lending Club, for example, says borrowers can have two “active” loans at the same time, according to the lender’s website. To qualify for a second 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.

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

Meanwhile, online lender Upstart says you can apply for a second personal loan only if you have made your last six 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.”

Things to consider before getting another loan

The benefits of taking out a second personal loan depend entirely on the circumstances. You should never take on more debt than absolutely needed. However, even the best financial planners can’t always predict life events that impact your finances. If the reward outweighs the risk of having multiple loans, it’s a decision that might benefit you in the long term.

But be careful of falling victim to a debt cycle of perpetually taking out more loans while digging yourself into a financial hole, as this a drawback of getting another loan. If you find yourself frequently taking out new personal loans, it might be time to examine your finances and decide if you really need to reapply.

Another major downside to taking out multiple loans is the effect it has on your credit score. This penalty might not appear right away, so don’t be fooled into thinking your score is safe from a recent loan application. Many lenders don’t perform a hard credit check at the time you apply for a loan — which would show up on your credit report and can shave a few points off your credit score — lenders wait until the money is heading your way to make a hard inquiry.

If you get approved for a second personal loan, expect another inquiry. Remi Harrad, spokesperson for online lender Prosper Marketplace, says that repeat borrowers could not qualify based on the original credit check, which is only good for 30 days.

Does it make sense to have multiple personal loans?

Even if you think you’re eligible for multiple loans, you should think twice before applying. Taking out a second personal loan could be a red flag that your finances aren’t in good shape. TransUnion 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.”

Get pre-qualified

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

The bottom line

How many personal loans can you have? While it’s certainly possible to open more than one loan at a time, this should really only be used in a dire financial situation in which the benefits outweigh the risks.