You’ve reached the final lap of your personal loan and can see the finish line only a few repayments away. However, whether due to an unexpected bill, urgent repair, need for a new car or you just want to go on a holiday, you’ve realised you want another personal loan.
So, can you take out a personal loan while you’re still paying one off? Or how soon after paying off your last personal loan can you apply for a new personal loan? Let’s explore these scenarios below.
Qualifying for a personal loan
To understand how soon you can apply for a new personal loan it’s important to know how to best boost your chances of being approved for the loan.
Depending on the lender, a personal loan provider may not necessarily mind that you currently have a personal loan, or have just finished paying one off, before you apply – if you meet their eligibility criteria and can responsibly service the loan.
Essentially, a personal loan lender will assess your chances of approval through a few key factors. All of which serve to determine whether you can afford to service the loan, meaning you can afford to make repayments.
These key factors for personal loan assessment include:
- Personal identification showing you are over the age of 18 and an Australian citizen or permanent resident,
- Good to excellent credit history,
- Proof of income (payslips, tax returns),
- Details of expenses (bank statements, rental logs, mortgage repayments), and
- Details of assets (property, shares etc.).
A personal loan lender will analyse the amount you wish to borrow against your income and your expenses and liabilities. An existing personal loan would fall into the latter category. If you were currently repaying a personal loan and the lender calculated that you may not be able to service an additional loan and its repayments, then your application may be rejected.
If you had just finished paying off a personal loan, a lender may not hesitate to approve you for a new personal loan assuming you met the above criteria. However, any debt you take on will show in your credit history. Having frequent credit listings in your history may appear risky to some lenders, especially if you’ve had issues making repayments on time. And multiple applications at one time can seriously hurt your credit score.
When should you wait before applying for a new personal loan?
A lender may choose to approve you for a new personal loan right after paying off an existing personal loan at their own discretion based on your individual financial situation. But there are some circ*mstances in which you may want to consider holding off.
- Your finances have decreased. Just because you were approved for one loan of a certain amount of funds doesn’t mean a lender has to do so again, especially if your circ*mstances have changed. A job loss or a decrease in household income may affect your application. Consider waiting until your income has increased again, or potentially apply for a smaller loan amount to boost your chances of approval.
- You’ve started a new job. Getting a new job is always exciting, but even with an increase in income, it may affect your chances of personal loan approval. Lenders look for stability in your finances and being employed with one company, or in the one role, for at least 3-6 months may improve your chances. If you’ve just started a new job, it may be worth waiting until your probation period is over at least until you apply for your new personal loan.
- Your credit score could be better. Whether you’ve closed a credit card account or experienced an adverse event, changes to your credit history can impact your chances of personal loan approval. While some lenders may offer personal loans to Aussies with poor credit history, a good to excellent credit score is preferable. If you’ve just paid off a personal loan, then the chances are this positive event might boost your credit score. It may be worth waiting until this is reflected in your credit history and credit score before applying. And if you need a helping hand increasing your credit score, read our guide.
Alex Ritchie
Personal Finance Editor
Alex Ritchie is a Personal Finance Writer and Editor at RateCity, and has been writing about Australian finance for over six years. Her expertise and passion covers loans, credit, superannuation, and closing the gender pay gap, and she aims to help young Aussies to overcome their financial apathy. Alongside RateCity, Alex has been published in numerous publications, including Australia's Money Magazine, Business Insider, Lifehacker Australia, and in health via NPS MedicineWise.
Alex Ritchie is a Personal Finance Writer and Editor at RateCity, and has been writing about Australian finance for over six years. Her expertise and passion covers loans, credit, superannuation, and closing the gender pay gap, and she aims to help young Aussies to overcome their financial apathy. Alongside RateCity, Alex has been published in numerous publications, including Australia's Money Magazine, Business Insider, Lifehacker Australia, and in health via NPS MedicineWise.
FAQs
Lenders look for stability in your finances and being employed with one company, or in the one role, for at least 3-6 months may improve your chances. If you've just started a new job, it may be worth waiting until your probation period is over at least until you apply for your new personal loan.
Can I get another personal loan after paying one off? ›
If you already have one personal loan, you can take out as many additional loans as lenders are willing to give you. Although there are no laws restricting the number of loans you can have at once, lenders tend to have individual policies limiting the number of loans and amount of money they will allow you to borrow.
How long should you wait between personal loans? ›
How long should I wait before applying for another loan? Again, this can depend on your bank or lender's policies. Some lenders require you to wait 3 – 12 months (or make 3 – 12 monthly payments) before you can apply for another loan.
How long should you wait between applying for personal loans? ›
If you get rejected for credit at any point, it's recommended that you wait at least three months before you try again to avoid this. If you're in need of money, common wisdom says you should only make one application in order to keep your credit rating healthy.
Does paying off a personal loan increase credit score? ›
Your successful payments on paid off loans are still part of your credit history, but they won't have the same impact on your score. When you close the account, you will now have fewer open accounts and less account diversity. If you paid your loan off early, your history will reflect a shorter account relationship.
What happens when a loan is fully paid off? ›
Most lenders will send you a notice that the loan has been paid in full, or you can request this as well. If you paid off an auto loan or a home loan, congrats! This means you now own the asset free and clear.
What is the maximum personal loan you can get? ›
Personal loan amounts vary widely among lenders. While some lenders allow you to borrow up to $100,000, others offer loans only up to $20,000. Most base your maximum loan amount on financial factors, like your annual income, your credit score and your repayment history.
How can I increase my personal loan amount? ›
You can't increase your loan amount, but you may be able to apply for a second loan. Technically, there's no limit to how many personal loans you can have. Lenders may approve a second or third loan if the borrower has paid off part of the first loan and has a history of on-time repayment.
How many personal loans are too many? ›
There's no limit to the number of personal loans you're allowed to have. However, the amount of debt you can take on is limited to how much a lender is willing to let you borrow.
Can you have two personal loans with the same bank? ›
If you already borrowed a personal loan but need additional funding, you may be wondering if you can take out an additional personal loan. The short answer is yes – there's no concrete rule prohibiting you from borrowing multiple personal loans at once.
Making late payments
The late payment remains even if you pay the past-due balance. Your payment history may be a primary factor in determining your credit scores, depending on the credit scoring model (the way scores are calculated) used. Late payments can negatively impact credit scores.
What is the easiest loan to get approved for? ›
The easiest types of loans to get approved for don't require a credit check and include payday loans, car title loans and pawnshop loans — but they're also highly predatory due to outrageously high interest rates and fees.
What is the easiest bank to get a personal loan from? ›
The easiest banks to get a personal loan from are USAA and Wells Fargo. USAA does not disclose a minimum credit score requirement, but their website indicates they consider people with scores below 640, so even people with bad credit may be able to qualify.
What do banks look at when applying for a personal loan? ›
Most personal loan lenders review your credit score, credit history, income and DTI ratio to determine your eligibility.
Can you restart a personal loan? ›
You can refinance a personal loan by prequalifying for a new loan, submitting an application and using the funds to pay off your old loan. Understanding the advantages and disadvantages of personal loan refinancing and how it might affect your credit can help you decide if it's a good option.
Do multiple loan applications hurt your credit? ›
However, applying for two different types of loans, for example, a student loan and a car loan within a two-week period can count as two separate hard inquiries. Applying for more loans after the timeframe of 14 to 45 days can negatively impact your credit score.
Can I pay personal loan all at once? ›
Yes, it can be a good idea to repay your personal loan early as you will be charged a less interest on the loan amount. Also, once you clear your loan early, not only will you be able to save considerable, but your overall credit score will also improve allowing you to avail another loan if necessary.
Can I get another loan to pay off another loan? ›
Consumers often use personal loans for debt consolidation, which involves getting a loan and using it to pay off existing debt from other sources.
