You have probably wondered if you can take out multiple loans from direct lenders at the same time. This is not a trick question, and there is no simple yes or no answer. It is allowed, and far more common than most people realise, but there are a lot of unspoken rules, small risks and important responsibilities you need to understand before you submit any applications.
Legally, you can have as many loans as you want in the UK. There is no legislation anywhere that caps the number of credit agreements one person can hold.
The direct lenders individually establish every single rule regarding multiple loans, and not the government or the FCA. The sole commonality that can be formulated about all lenders is that they must undergo a complete and fair check of their affordability before they can grant any new loan.
Some important things:
Some lenders will refuse you outright if you have more than one other open loan. Many people are surprised to find that bad credit loans from direct lenders are often far more flexible when it comes to multiple existing loans. They will usually look far more closely at your actual disposable income. They will also not decline an application just because you have taken out another loan in the last three months.
You can have a personal loan and car finance running alongside each other. You can have two separate personal loans from two different lenders. You can have a guarantor loan and a short-term cash loan.
It is even possible to have more than one payday loan. No respectable lending institution will grant you such an opportunity, should you request it.
You are likely to come across is that no lender will grant you the facility to borrow a second loan with them in order to repay the first loan.
The lender will run through the same core set of checks when you apply for a new loan. They all follow the same basic order.
You can get bad credit loans from direct lenders. The direct lenders will weigh your income more than any other factor on this list. They are interested in how much you can pay back and not your previous financial errors. Stable income will make it more likely to be approved, despite a low credit score. They often have simpler checks and faster decisions. They may offer flexible repayment options based on your income level.
Having multiple loans will not damage your credit score. The actual impact is down to how you manage them and how you apply them. Some important details:
This hard search will stay on your file for 12 months. If you make three or more applications in 30 days, all lenders will see this as a sign of financial stress, and it will lower your credit score.
Your credit utilisation ratio is the single biggest factor. This is the total amount you have borrowed, compared to the total amount you have been approved for. If this ratio stays below 30%, multiple loans will actually improve your credit score.
The direct lenders operating in the UK are regulated by the FCA, and there is a set of hard rules that apply no matter how many loans you have. A lender cannot break these rules, even if you have ten separate loans open at the same time.
Things you have a right to that most people do not know:
The responsible lending rules apply to every single new loan application. A lender must refuse you a loan if they have any reasonable reason to believe you will not be able to afford the repayments. It is illegal for a lender to approve a loan that they know you cannot afford.
You can take your complaint to the Financial Ombudsman for free if you have a dispute with any lender. You also have access to completely free independent debt advice from some different charities.
There is no one right answer that applies to everyone here. Taking multiple loans can work completely fine if you stay on top of every repayment. It can go very wrong if you overstretch what you can afford. Never rush an application, and never take an extra loan.
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