Can you apply for multiple loans?
Why you should avoid multiple loan applications in a short time
Whether you’re planning to borrow money to make home improvements or to consolidate debts, you may be wondering: can you get more than one loan?
However, if you’re applying for multiple loans in the hopes of securing the best deal, you could hamper your chances of being approved. In this handy guide, we’ll explore why taking out multiple loans too quickly isn’t usually a good idea and offer advice on smarter ways to apply.
What happens when you apply for multiple loans?
Every time you submit a loan application, the lender will carry out a hard check. This is recorded on your credit file, and if you’re applying for multiple loans in quick succession, other lenders can access this information.
When a credit file shows that you’re applying for multiple loans in a short period, lenders could assume that you have financial difficulties behind the scenes. This could make them less willing to approve your loan or offer terms that are less favourable.
So, while you can apply for multiple loans, doing so over a short period might hurt your chances of getting approved.
Does applying for multiple loans hurt your credit score?
The short answer is yes. Each hard check may slightly lower your credit score, so if you’re taking out multiple loans or applying for too many loans frequently, those effects can add up.
Hard checks vs soft checks
There are two types of credit inquiries that lenders will run when checking your eligibility for certain financial products: soft checks and hard checks.
Soft checks
A soft credit check won’t affect your credit score. These checks are used when you check your own credit report, or when you are preapproved for products such as a credit card or a rental or utility application. They’re a useful way to understand your financial standing without any negative impact.
Hard checks
A hard credit check is a more thorough look at your credit history, usually conducted when you apply for credit, such as a loan or mortgage. This type of check is recorded on your credit file and can adversely influence your credit score. Lenders use hard checks to make informed decisions about your application.
Can you take out more than one loan?
Although it is possible to have multiple loans at once, there are certain risks. Here are some things you may wish to consider before taking out multiple loans:
- Impact on your credit rating: Every time you apply for a loan, your credit score may be affected. Lenders will see your past applications, and if there are multiple checks, they might view you as a higher risk. This can impact your chances of getting approval.
- Accumulating debt: Taking out multiple loans can lead to accumulating debt. More loans mean higher monthly repayments and your debt-to-income ratio may increase. If you have a change in income, it could put you in a more difficult position.
- Debt cycles: Relying on loans too often could signal you’re stuck in a debt cycle. If you find yourself repeatedly taking out loans, explore other options. Consider seeking professional advice or looking into ways to manage your expenses, such as budgeting, debt consolidation or other solutions designed to help you regain financial control.
Why do lenders care about multiple loan applications?
Each application typically triggers a hard credit search, which is recorded on your credit file and can lower your credit score. This could make lenders cautious, as it might suggest financial instability or an urgent need for credit.
Additionally, applying for too many loans in quick succession could lead them to believe you’re taking on too much debt or struggling to secure approval elsewhere.
How long should you wait between loan applications?
It’s advisable to wait at least three to six months between applications for loans. This helps to protect your credit score from the impact of multiple hard checks and avoid the risks of applying for too many loans in a short window.
How to avoid applying for multiple loans
Applying for too many loans can harm your credit score and your financial health. Here are practical tips to help you protect your financial stability:
- Assess your financial needs: Carefully evaluate how much money you truly need and whether a loan is the solution. You should consider alternatives such as budgeting or using savings to cover costs instead of borrowing.
- Use prequalification tools: Many lenders offer prequalification services that involve soft credit checks rather than hard ones. This allows you to explore potential loan offers without negatively impacting your credit score.
- Consolidate debt instead of taking out new loans: If you’re struggling with multiple debts, you could consider consolidating them into one manageable loan rather than applying for multiple new loans.
- Space out loan applications: Avoid applying for too many loans in a short timeframe. If possible, wait at least three to six months to minimise the impact of hard checks on your credit report.
- Improve your credit score before applying: Start by trying to repay existing debts, ensure you always make timely repayments and review your credit report for errors or discrepancies. A higher credit score can help you qualify for better loan terms.
- Plan for financial emergencies: To ensure you’re prepared for any unexpected financial burdens, try to build an emergency fund to reduce the reliance on loans. Having savings can prevent the need for multiple loan applications in a short period.
- Seek professional financial advice: If you’re unsure which financial products may offer the best solution, you should consult with specialists who can offer guidance based on your personal and financial situation.
Apply for a loan with Evolution Money
We hope that this guide has given you an understanding of the risks involved with applying for multiple loans, and helps you make decisions to protect your credit score and financial health.
If you think a secured loan could be the right option, you can check your eligibility with us today without impacting your credit score. We’ve helped over 30,000 customers find flexible financial solutions with lenders and could help you secure loans of between £5,000 and £100,000. You can find out what customers say about our services by taking a look at our positive reviews.
Representative 28.96% APRC (Variable)
For a typical loan of £26,600 over 180 months with a variable interest rate of 19.56% per annum, your monthly repayments would be £484.00. This includes a Product Fee of £2,660.00 (10% of the loan amount) and a Lending Fee* of £763.00, bringing the total repayable amount to £87,030.00. Annual Interest Rates range between 11.7% to 46.5% (variable). Maximum 50.00% APRC. *Lending Fee varies by country: England & Wales £763, Scotland £1,051, Northern Ireland: £1,736.
Think carefully before securing debts against your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
