Sometimes unexpected life events create the need to take out multiple personal loans at once. Millions of Americans take out a loan each year to pay for an unexpected expense or make ends meet.
When you already have one personal loan and need another, what should you do? This article outlines how many personal loans you can have at once and presents options for reducing your debt.
Can I Avail Two Personal Loans?
It’s possible to take out two personal loans simultaneously. In fact, there is no limit to how many personal loans you can have out at once. You can take out two personal loans with the same lender, or get a second loan from a separate lender.
However, the status of your current loan and how it affects your finances will impact the lender’s decision regarding approval for a second loan. Factors such as your debt-to-income ratio and credit history, which lenders consider when accessing new loan applications, may be negatively impacted by your prior loan.
Most lenders allow individuals to take on additional loans if they pay off part of the balance of the initial loan. Lenders use your credit score to assess your payment history and determine whether you can handle a new loan. Individuals with a history of on-time loan repayments can generally secure multiple personal loans.
If your credit is negatively impacted by your prior loans, you may have to look to subprime personal loans or even payday loans to take out a second loan.
Subprime Personal Loan Direct Lenders
Traditional lenders are not an option for everyone. They can limit personal loan options depending on your credit score. For example, banks and credit unions will only offer a loan if you have a good credit score. Anyone with a subprime credit score must find an alternative source of financing.
Subprime lending refers to offering loans to people with poor credit scores. Anyone with a credit score below 600 may struggle to get a loan product. This is where subprime lending comes in.
If you’re struggling with bad credit, turn to subprime lenders in case of a financial emergency. You can find direct lenders providing quick online payday loans. These direct lenders offer the best overall loans for people with credit challenges. You can get up to a $35,000 direct loan.
You can find several subprime options for personal loans, credit cards, business loans, or mortgages. However, these loans have higher interest rates because of the risk that the lender takes on.
Advantages of direct subprime lenders include lower starting interest rates and the lack of prepayment penalties. For example, direct lenders can offer interest rates as low as 9.9%, depending on your credit score.
How to Get Multiple Payday Loans
If you cannot get approved for multiple personal loans, an easier option may be to take out multiple payday loans. These are short-term loans for a small amount of about $500. People generally get payday loans to bridge the gap between paychecks or help with unexpected expenses.
Payday lenders target anyone who needs fast cash to make ends meet. These lenders are a bit more relaxed in their lending standards. However, they will still look at your credit report before giving you multiple payday loans. You can take multiple loans if you can provide proof that you can pay them back.
Recent CFPB regulations allow borrowers to take multiple payday loans. However, unlike personal loans, some states do limit the number of payday loans you can have. This is because payday loans put borrowers at a higher risk of increasing their debts or defaulting.
One downside of getting payday loans is the short payment terms and high interest rates. If you’re wondering how to get multiple payday loans, you should first worry about how to pay off multiple payday loans.
If you are a Credit Union member, a better option may be an alternative payday loan. This small-dollar loan has lower interest rates with a generous payment structure similar to traditional payday lenders.
How to Pay Off Multiple Loans
No matter what kind of loans you take out, if you are not careful, you can plunge yourself into a cycle of debt. Here are some great strategies if you are struggling to pay off multiple personal or payday loans:
1) Focus on paying back the high-interest loans first. This way, you can prevent the higher interest rate from creating a larger payment down the road. Once you have repaid all the high-interest loans, you can focus on the other loan types.
2) Reach out to your lenders to see if they have an extended repayment plan on your lower APR loans. Most lenders will accommodate your repayment plans if you show promise of repaying your debt. If they can push back the repayment date on your lower APR loans, this gives you time to first deal with the higher APR loans.
3) Be open with your lender. Communicating with them more often can help you pay off the payday loans. Most lenders are understanding. If you reassure your lender directly of your intention and plan to repay them, they may not report negatively on your credit.
4) Focus on taking control of your finances and take action on your debt management plan. You can consolidate your debt by taking a personal loan with a low interest rate to pay some outstanding high-interest personal loans or payday loan debts. Using a loan with a low interest rate to pay off high interest rate loans can save you lots of money in interest. It can also help avoid the unrelenting set of monthly payments from different lenders.
Bottom Line
You can take out multiple personal loans if you show promise of repaying them in accordance with the lender’s terms. However, getting a second loan can trap you in a cycle of debt and affect your credit score and financial health. Just because you can take out many personal loans at once, doesn’t mean you should. Do your best to avoid multiple loans if at all possible.
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