A Second Personal Loan While You Repay the First

Can you have two personal loans at once?

Each lender sets its own policy on how many loans you can hold. Some let existing borrowers apply for a second loan once they meet conditions such as on-time payments on the first and a minimum time between applications. Others limit you to one loan at a time with them, but will see a loan from another lender only as one more debt in your file.

Either way, a new lender sees the first loan on your credit report: the balance, the payment and how you have paid it. A loan opened only a few months earlier can make a lender cautious, because a quick second application can look like a sign of strain.

Worked example: what the second payment does

You borrowed $10,000 at 15% for 36 months a year ago. The payment is $346.65 and the balance after 12 payments is $7,149.46. Now you need $5,000 more. You earn $5,200 a month before tax and pay $1,450 for housing and other debts.

A lender with a 36% limit would have room for a new payment of only about $75, which at 18% over 36 months supports a loan of about $2,084. Expect a smaller counteroffer or a denial; loan counteroffers explains how to judge one. The borrowing room calculator shows where your own ratio lands, and the debt-to-income calculator guide explains which debts count.

The cost of applying again

When you apply, a lender usually pulls your credit report, and that hard inquiry can lower your score for a time, because scoring models look at how often and how recently you apply for credit. A second loan within months of the first adds another. Checking your rate through prequalification normally uses a soft inquiry, which does not affect your score. Hard vs soft credit inquiries covers the details.

A second loan may also carry a second origination fee. If it is deducted, gross up the request so you receive what you need; covering fees in the loan amount shows the math.

Two loans or one combined loan

The alternative is a single new loan that pays off the first balance and adds the $5,000: $12,149.46. Here is the same example both ways over the next 36 months.

The combined loan lowers the payment by about $100 a month but costs about $550 more, because the $7,149.46 you would have repaid in 24 months now runs for 36. A combined loan only saves money when its rate is low enough to beat that longer schedule, or when you keep paying the old, higher total. Borrowing more on an existing loan covers refinancing for a larger amount, and a second loan over 24 months would end with the first one: $249.62 a month and $990.89 of interest.

Before you take the second loan

1. 1 Price the need first. Borrow the documented cost, not a round number; a second loan to cover a shortfall is easier to avoid with a careful first sizing.
2. 2 Add both payments to your budget. The lender's limit is not your margin. If the two payments together leave no room for a bad month, wait or borrow less.
3. 3 Check your current lender first. If it offers existing borrowers a second loan or a refinance, compare that offer with outside offers on APR and total cost.
4. 4 Line up the end dates. A second loan that ends near the first one keeps the period of double payments short.
5. 5 Compare other credit. For a small sum, a credit union loan or another option may cost less; personal loan vs credit card helps you weigh them.

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