Many people have experienced financial problems that require taking out a personal loan. Yet, sometimes one personal loan just isn’t enough. In some cases, it can make financial sense to take out two loans at one time. Doing so gives you immediate access to more money, but it can also increase borrowing costs. Furthermore, it can affect your credit, and signal financial distress to other lenders. Thus, it is important to carefully plan out the borrowing process. If you are considering taking out two loans, you may benefit from the following advice.
Be Aware of the Consequences
While it’s possible to have two loans at once not all lenders will look upon it favourably. If you are fortunate enough to qualify for contemporaneous loans you need to understand that it could have a negative impact on your credit. It could also cause you to get denied for such loans in the future. Additionally, it can affect your ability to take out other types of loans or to enrol in a debt consolidation program.
In Australia, approximately 3% of personal debt on a nationwide scale is due to these types of loans. As such, it is not uncommon for the average Australian to use personal loans. Yet, you should fully understand the benefits and consequences of joining the 3% before you take out two loans.
Making a Repayment Plan
It doesn’t make sense to borrow money if you don’t have a clear idea of how it will be repaid. You need to be especially diligent in creating a repayment plan for two separate loans. If you are struggling to pay off the first loan, it may be a good idea to avoid the second one. However, if you feel confident that your finances will allow you to meet both obligations, then taking out two loans is manageable. Plan accordingly by working extra hours or cutting back on other expenses. The last thing you want is to take two hits on your credit score because you over-extended yourself.
Only Borrow What You Need
It is tempting to borrow a little extra in case you need it. Nonetheless, that extra cushion amount could create problems when trying to pay back the loan. It’s no surprise that borrowing more money will cost you more in interest payments. It will also raise the amount of your monthly principal payment. Consider whether you can really afford to borrow more and whether it is really worth it. You are more likely to be successful if you borrow only what you need.
Pick Loans with Favourable Terms
Applying for a loan is a consumer transaction just like anything else. Considering this, make sure you shop around to get a loan that fits your needs and ability to repay. Some loan companies allow you to re-borrow against payments made to the loan. This can be useful when other unexpected expenses arise. There are also loans like jet ski or truck finance with flexible repayment plans. These plans allow you to pay more or less on your loan without any additional penalties. They may also offer a payment holiday which allows you to skip a payment at your discretion.
It pays to understand all the terms of a loan before you sign the contract. Take care to understand the interest rate and payment schedule beforehand. Don’t be afraid to discuss your needs with the loan company so that you know what you’re getting. The successful juggling of two loans requires being well-informed and well-prepared.