Multiple car loans might apparently ease out financing when you have more than one car. How many car loans can you have? Honestly, there’s no upper limit on how many car loans one can have. Still, qualifying for another car loan when you already have one can be pretty tricky.
Hence, multiple car loans might not help you financially. Instead, they can add to your financial burden. Can you have 2 car loans at the same time? Yes, it’s possible, but you must take care of your credit history and more. These characteristics will assist you in figuring out whether you can tackle another vehicle loan.
Let’s start from scratch so that this guide makes sense to everyone.
What Do You Mean By a Car Loan?
A car loan is an amount of money you consider borrowing from a lender, preferably a bank or any other financial institution. However, you have to sign a binding contract with the lender before they fund your car.
In return, you must repay the lender with the entire loan amount, including the car loan interest. Moreover, you need to repay it by a specific term or date. On the other hand, the vehicle’s condition and your financial circumstances decide how much you can borrow from the lender.
What is the repayment term or window for a car loan? Generally, lenders require you to repay the loan amount and interest within 84 months. However, all these things can vary from one lender to another.
In addition, you don’t have to pay the car loan alongside the interest fees in a single payment. Instead, the lender offers you affordable monthly payments over the specific loan repayment term. Hence, financing your vehicle through a suitable car loan is the best option when paying for your vehicle at once is challenging.
Financing 2 Cars Simultaneously
Owning 2 cars is convenient for you and your family members, no doubt. However, purchasing them at once can be challenging. So, you might think of financing your 2 cars simultaneously. Can you have 2 car loans at the same time?
In short, the answer is yes. Basically, you will face no legal restrictions to finance both your cars simultaneously. However, the main challenge is to get approved for a second car loan from a lender.
Typically, lenders consider the following financial factors of a borrower before deciding whether they will approve another vehicle loan:
- Credit score
- Payment history
- Debt-to-income ratio
They check whether you can handle the additional monthly expense that the second car loan will bring in. When do lenders discard a second vehicle loan request? Well, they can turn you down if you have a debt-to-income ratio above 43% and a poor credit score.
On the other hand, even if they approve your car loan request, you might get a lower loan amount along with a higher interest rate. Now, this can prevent you from buying the car that was on your mind as your next purchase.
However, you must add your new vehicle to an existing car insurance policy once lenders approve you for a second vehicle loan. Additionally, you should buy inclusive and collision coverages.
Furthermore, financing 2 cars at the same time can be financially hard. Therefore, ensure you have one or more stable income sources. After all, you must pay towards monthly payments on both your car loans. Otherwise, financing 2 cars simultaneously can shake your financial ground if you fail to carry them out efficiently.
Steps to Finance Multiple Cars
How many car loans can you have? Since there’s no cap on how many car loans you can have, you might opt for multiple car loans at the same time. However, this might damage your financial background if you struggle with any of the car loan payments.
On a related note, you can get a personal loan for the second car if you already have an existing car loan. A personal loan is a non-collateral loan, and you can spend the loaned amount at your convenience. Alternatively, you can purchase another car loan for the second car.
However, you can spend the loaned amount only to purchase another car. Consider the following points if you want to draw out a personal loan instead of another car loan:
- Decide which vehicle you want to purchase and how much it costs. Contact multiple dealerships to obtain the best price.
- After you learn how much money you need to finance your car, you can start applying for a personal loan. So, contact lenders such as banks and other feasible financial institutions to find the best amount and interest rate for the personal loan.
- Wait for the loan application to be approved. Once your checking account receives the loan, you can buy the car with the best offer.
- Rest assured, and you have to pay off your loan on a monthly instalment basis as long as the loan term is active.
What if You Request a Second Car Loan?
Instead of a personal loan, you may be more interested in purchasing your second car with another car loan. Can you have 2 car loans at the same time? Yes, you can. Here are the proper steps to get a second vehicle or auto loan:
- Start by asking your preferred dealership about the best option to close a deal with a second car loan.
- After learning about the final price of your car, you can contact different lenders to obtain the best loan amount and interest rate.
- In addition, you have to keep your credit score and monthly income in mind before applying for a second auto loan.
- Check out whether you are eligible to get a second car loan. After that, you have to provide your lender with essential documents.
- Next, the lender will double-check the provided information and let you know if you are approved for the requested car loan.
- Once approved, you can pay for the second car with the deposited amount in your checking account.
Now, you must pay monthly instalments towards the loan account until the term ends.
Things to Consider Before Applying for a Second Auto Loan
Taking out a car loan makes sense when you desperately need another vehicle for your family, or you can afford those monthly payments to loans. However, having 2 car loans at the same time can be both advantageous and challenging for an individual. For example, you have to consider the following points before you think about taking another vehicle loan:
Impact on Your Financial Status
It’s very important for you to ensure that you can afford a second auto loan. If you miss any of your monthly car repayments, it can drastically affect your credit score. Moreover, that financial scar on your credit report can stay up to 7 years.
You will protect your vehicles with the required insurance and their premiums. However, the more cars you own, the more insurance premiums you pay to keep your vehicles safe. Hence, you must calculate how much you must pay towards your car insurance premiums before taking out a second car loan.
Regardless of the number of car loans you have applied for, your credit score can be negatively impacted. It can reduce your credit score temporarily. Thus, you must face a temporary restriction in getting any kind of finance.
Therefore, it’s better to delay your car loan application if you plan to take a personal loan for something important, such as applying for a mortgage for a house purchase.
Enhance Your Chance to Get a Second Auto Loan
Getting 2 car loans with a bad credit score is not possible. However, you can apply some tips and tricks to get a second car loan. For practical reasons, lenders check a second car application more strictly, and you may lose your chance to get it approved. Thus, you can try the following steps to secure a second auto loan:
Consider a Co-Applicant
Are you about to finance a second car? If yes, you can apply for a second vehicle loan with a co-applicant. For instance, you can apply for a loan with your parent or spouse. This won’t affect your credit score. However, not every lender accepts a co-applicant for a car loan.
Select a Less Expensive Car
A less expensive car can heighten your chances of getting a second car loan approved. Your lender can approve a car loan if your new vehicle costs less. On the other hand, you have to face lower interest rates, and your monthly payments remain affordable.
Opt for a Large Down Payment
Another brilliant way to increase your chances of getting a car loan is to minimise the amount of the second auto loan. To do so, you have to make a large down payment. Thus, your lender can approve the loan as you show eagerness to pay the loan and finance your car efficiently. However, you must focus on saving to make a large down payment for your car.
2 car loans at the same time can be pretty challenging. However, it’s not impossible to get a second car loan. However, you must check out basic loan terms before you opt for a second auto financing. Remember, financing the same car with 2 loans is not recommended but is still possible.