You’re already paying off a current personal loan that you took out to help cover some extra expenses. But now you might need another loan. Is it possible for you to have more than one personal loan at the same time?
Moreover, if you’re allowed to take out multiple personal loans, what are the potential risks of having several personal loans at the same time and how will it impact your financial situation?
There is no limit on the number of personal loans you’re allowed to take out in Canada. That said, the number of loans you can get approved for at the same time will depend on your financial circumstances and ability to handle more than one personal loan at a time.
More specifically, certain factors impact your ability to get approved for two or more personal loans, as well as the loan amount, including the following:
There is no rule that says you can’t apply for more than one personal loan at the same time. It’s certainly possible, but you may want to consider whether or not it’s worth it given the fact that your credit scores and financial situation could be negatively impacted.
When you apply for a loan, the lender will usually access your credit report to verify your creditworthiness and likelihood to repay the loan. This is referred to as a “hard inquiry“, which may cause your credit scores to dip.
Too many hard inquiries within a short period of time can signify financial trouble to future lenders which can make it more difficult for you to get approved for any loan you apply for.
If you’re simply applying for multiple loans to compare rates and terms, you should try:
If you’re trying to get a larger loan amount by taking on multiple loans, it’s important to beware of overborrowing. Lenders check your credit and overall financial health to make sure you are financially capable of handling the loan. The requirements lenders have in place not only protect the lender from the possibility of loan default, but it also protects you.
That’s because the lender will base your loan approval on your financial situation. You’ll only be approved for a loan that you can feasibly handle. This way, you won’t commit to a loan that could cause debt issues for you in the future.
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Yes, you can apply for multiple loans but it’s important to understand that new debt might not appear on your credit report immediately after being approved for a loan. So lenders might be approving you with a new loan based on your old debt level, which can cause problems for you once that extra debt load is added to the pile.
Before you apply for several personal loans simultaneously, it would be helpful to consider a few important factors, including the following.
What is the reason why you’re applying for a second personal loan? Is it a pressing need? An urgent expense? An important purchase?
When you add another personal loan to your debt, you’re also adding another bill payment to your financial obligations. Considering this, be sure that the reason you’re applying for an additional loan is worthy of adding more debt to the pile.
Will you be able to comfortably cover an additional monthly bill payment on top of all the other bills you have to pay? Even though you may be able to get approved for another personal loan, that doesn’t necessarily mean that the added payment will fit comfortably into your budget.
You may find that you have very little money left over every month after all your bills are paid. That leaves nothing extra to use for other purposes, including saving for a rainy day. And if your financial situation changes suddenly for the worse — such as a job loss, unexpected large expense, or injury that leaves you unable to work — you could find yourself in a financial predicament if you max yourself out on loan payments.
Overborrowing involves taking on too much debt to the point that it negatively affects other aspects of your life. If you overborrow and experience financial issues in the near future (i.e: missed payments, high debt, bankruptcy), your credit may be negatively affected. Plus, your ability to borrow again may be impacted, too.
After careful consideration of your financial situation — both current and future — you may have decided to go ahead with applying for more than one personal loan. If so, here are some things you can do to improve your chances of loan approval:
While it might be possible to have more than one personal loan at the same time, it might not be such a good idea if it means maxing out your finances. Before you apply for an additional personal loan, consider your current financial situation and how much you can comfortably afford.
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Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.
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