Loans are helpful for people who need additional funds to consolidate debt, pay medical expenses, afford various home improvement projects, and pay for a new car. They’re great when you don’t have the money to pay for important purchases right away.
Taking out several loans doesn’t mean you’re receiving free money and can use a loan whenever you want. Before applying for loans left and right, continue reading about what happens if you apply for several at one time.
Is It Possible To Take Out Two Loans at Once?
The short answer is yes; it’s possible to take out two loans at once. It depends on the lender. Some lenders may allow this, while others will not. Just because it’s possible to take out more than one loan doesn’t mean it’s the best option.
Negatively Impacting Your Credit Score
A mistake beginners make when applying for loans is forgetting to consider how the loans will impact their credit score. The moment you submit a loan application, your credit score drops.
A hard inquiry is a drop in credit score due to submitting a loan application. If you apply for more than one loan, you’re submitting another hard inquiry that will further impact your credit score. It may limit your chances of approval for a loan in the present or the future.
Soft inquiries occur when you want to check your credit score, but you never formally apply. Therefore, this type of inquiry will not impact your credit score.
The bottom line is that applying for multiple loans will decrease your credit score and lessen your chances of receiving another loan. You should always focus on improving your credit score so you can stay prepared whenever you need a loan for financial assistance.
Going Further in Debt
Financial situations vary from person to person. Everyone takes out loans for different purposes. Depending on the lender, personal loan payments begin soon after the approved loan.
If you apply and a lender approves you for several loans at one time, you’re making payments on the principal amount and interest on two loans or more at once. The average loan takes 10 years to pay back to the lender. You may have trouble paying your monthly bills and instead find yourself further in debt.
Set Clear Financial Goals
Taking out personal loans may help you achieve financial goals, but applying for several loans at once will result in more payments each month. Consider your current necessary payments and savings account value before submitting any loan applications.
The goal should always be to live a comfortable life and avoid placing yourself in more debt than necessary.