You may be able to take out more than one personal loan at a time, but there are good reasons to keep a lid on your debts.
Can you get a personal loan if you already have one?
You can generally hold more than one personal loan at a time, or juggle multiple other types of loans or credit products–like car loans, home loans, or credit cards–at once. However, individual banks and lenders may limit the number of loans a particular customers can take out, so if you have a loan with one institution, it may not be willing to give you another. You can apply for a loan from a different lender, but that doesn't mean you’ll be successful
Additionally, banks and lenders are required by law to lend responsibly, and they will want to know about any existing loan commitments whenever you apply for a new personal loan. When a lender analyses your income and expenses, it will check for repayments on any existing loans you might have. If it believes extending more credit could leave you stretched thin financially, you may be knocked back or offered a smaller loan than initially requested.
How many personal loans can you have at once?
In theory, if you meet a lender’s criteria and your income can cover the repayments on multiple personal loans, there's no limit on how many loans you can have. However, there are downsides to holding lots of personal loans at once, including the risk of getting into serious financial trouble and damaging your credit score. Our personal loan repayment calculator can help you understand how much a new loan could cost you.
Possible damage to your credit score
Each application you make for a loan appears on your credit record, and multiple applications in a short span of time can lower your credit score. This can make it harder to be approved for another personal loan—or even something as important as a home loan—with the lender of your choice.
Not sure what your credit score is now? You can check your free credit score for free with Canstar.
How do I qualify for a personal loan?
Each lender will have its own specific criteria by which it measures applicants before approving them for a personal loan. You will typically need to meet minimum income requirements, be employed or earn a regular income, have a good personal credit rating, and not be going through the process of bankruptcy.
How much you plan to borrow can shape your likelihood of being approved for a personal loan, and a number of lenders have online calculators that provide an estimate of your borrowing capacity.
Alternatives to taking out a second loan
If you need extra funds for an upcoming expense, there may be alternatives to taking out another loan that you could consider.
- Use savings: If the expense isn’t urgent, setting aside money over time can help you avoid interest charges and keep your debt levels in check. Saving the money may take longer, but can be more cost-effective in the long run.
- Inquire about a redraw facility: If you need funds sooner and have made extra repayments on another loan or your mortgage, a redraw facility might allow you to access those surplus funds. This can be a convenient option, but be sure to check your lender’s terms, as some redraws come with fees or minimum withdrawal amounts.
- Top-up on an existing loan: Some lenders may allow you to top up your existing loan, adding the new amount on top of your existing balance. This can help you avoid multiple repayments, though approval will depend on your income, credit score, and repayment history. Similarly, if you have a home loan and enough equity, you may be able to top up your home loan to access additional funds. This doesn’t automatically extend your loan term, but it may increase your repayments.
Whichever option you’re considering, take the time to compare the interest rates, fees, and impact on your overall financial position.
The potential to get into trouble with debt
Having multiple personal loans means juggling different repayments dates, various interest rates and dealing with more than one lender, plus multiple sets of statements.
The more loans you have, the easier it can be to lose track or fall behind on your loan repayments, and the Australian Financial Security Authority (AFSA) warns this could see you caught up in a spiralling debt cycle.
The solution can simply be to limit the number of personal loans you take out. Or, if you already have several personal loans, it may be worth thinking about debt consolidation, which sees you rolling all your existing debts into one new loan, which can help to streamline repayments. A debt consolidation loan can also help you pocket savings by offering a lower interest rate or fewer fees than you’re currently paying.
Ultimately, a personal loan can be a handy financial tool. But moderation and getting a good deal in terms of the interest rate and terms and conditions of a loan agreement are important. Sticking to just one or two personal loans can make it easier to manage your money and protect your credit score.
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