How Many Installment Loans Can a Person Have at Once?

February 17, 2023 at 15:00 PM EST

Installment loans can come in handy. Some people might get one to cover emergency expenses like car repairs and roof leaks, while others may put the funds toward home improvement projects, celebrations of special occasions, or even vacations.

So, can a person have multiple installment loans? Yes, it is possible to have several installment loans at the same time.

Is having multiple installment loans a good idea?

Sometimes, it may be smart to have more than one installment loan. For example, if someone took out a loan to pay for an unexpected medical bill but now they’re ready to consolidate debt, applying for a second loan might be worthwhile. However, if they decide to go this route, they should keep the following in mind:

The lender may have limits: Many lenders have their own rules on how many loans they’ll make to an individual borrower. Some lenders impose maximums on the total amount of money they can loan, and sometimes these limits are due to state laws.
Existing debt matters: Even if a lender allows multiple loans for a borrower, they’ll likely look at the borrower’s debt-to-income ratio (which compares monthly debt obligations to gross monthly income) to evaluate each new loan application. A high debt-to-income ratio may lead the lender to decline the new application.
Multiple loans can hinder finances: Just because a lender approves a borrower’s request for multiple loans doesn’t mean the borrower should sign on the dotted line. Having more than one loan can be risky and can end up leading the borrower into a cycle of debt that could be hard to escape from.

Alternatives to Installment Loans

While installment loans are one option, there are other ways to cover expenses that should be explored, including:

Start saving: If someone can wait to make a purchase or cover an expense, saving up and paying in cash may be the best option. With this approach not only does the person save on interest charges, but the money sitting in the savings account earns interest.
Balance Transfer Credit Cards: Balance transfer credit cards let those who qualify move their current credit card debt to a card with a lower interest rate. As a new cardholder, it’s common to be offered a 0% APR introductory offer. Sometimes a card you already have may offer a 0% APR promotional offer for balances transferred from other cards. In either case, the cardholder won’t pay any interest if they make regular minimum monthly payments and repay the balance before the offer period ends. Often, the offer period can range from six to 21 months. Keep in mind that even if the APR is 0%, there is often a Balance Transfer Fee that is charged as a flat fee or a percentage of the dollar value of the transferred balance(s).
Payment plans: Depending on what kind of expense it is, the merchant or creditor may be willing to offer a payment plan and break up the balance due into manageable periodic payments. Many medical providers and retailers offer such plans, so this option may be worth considering.
HELOC or a home equity loan: The person who owns a home and has equity in it, may be able to take out either a home equity line of credit (known as a HELOC) or a home equity loan. A HELOC is a revolving line of credit that resembles how a credit card works while a home equity loan offers the borrower a lump sum of money upfront to be paid back in installments. The important thing to remember is that with these financing options, your home is collateral for the loan and repayment terms, especially for a HELOC, often involve a variable rate APR.

The Bottom Line

Installment loans are versatile financial tools that can make it easier for people to pay their expenses. In some cases, taking out multiple installment loans at once might make sense. But before someone does this, they should evaluate their finances and how much debt they already carry, as well as explore alternative options.

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