Can You Have More Than One Debt Consolidation Loan at One Time? — Tally (2024)

We’ve recently spent time discussingdebt consolidation loansand how they can be effective at reducing balances and providingdebt relief. Because of the perks they provideborrowers, you may have asked yourself, “Can you have twodebt consolidation loansat one time?”

The answer, in summary, is that yes, you can have twodebt consolidation loans. But, just because you can does not mean that it’s in the best interest of yourpersonal financesto do so. Let’s take a closer look at whatdebt consolidation loansare and the implications that come with carrying more than one.

What is adebt consolidation loan?

Adebt consolidation loanis a type ofpersonal loanthat allows you to pay down outstanding balances from otherlenders, typically at alower interest rate. The loan pays down your unsecured debt. Thesetypes of debtcan include:

• .

• Medical bills.

• Other personal loans.

• Student loans (possibly, so long as they are not secured).

A debt that is not secured means that it is not backed by collateral. For instance, if you have a mortgage orhome equity loan(HEL), you are borrowing against the equity in your home.

Should you default and fall behind on yourloan payments, yourlendercan take possession of what you’ve put as collateral— in the cases of mortgages and HELs, the bank can repossess your home. Secured debt is not eligible for debt consolidation. You can only consolidateunsecured debt.

A debt consolidation loan example

So, as an example, let’s say that you havecredit card debton three cards:

• Card one: $5,000 balance, 17% APR.

• Card two: $10,000 balance, 16% APR.

• Card three: $3,000 balance, 22% APR.

The total outstandingcredit card debtis $18,000. Instead of trying to pay these down while battling compounding interest, you instead secure adebt consolidation loan amountof $18,000. Theloan termsare for a 5% interest rate, andrepaymentis to occur over 36 months.

You use the $18,000 you borrowed to pay down thecredit card balancesimmediately. Then, you pay back the loan with a 5% interest rate. The choice you’ve made torefinanceto alow interestrate saves you money in the long term.

Therepayment periodis 36 months. You have fixed payments due each month. These are theminimum paymentsrequired. You can pay more to help accelerate your timeline, but you can’t pay less without facinglate fees.

Can you have twodebt consolidation loansat the same time?

Let’s take our example above one step further. You and a spouse each havemedical billsof $12,000. The bills have been sent to collections, and it’s urgent that you pay them. You have considered debt settlement but are worried about the long-term implications to yourfinancial situationand the impact it will have on yourcredit score.

Instead, you take out another personal consolidation loan for $24,000 to pay off themedical bills. Now, instead of having onesingle loan, you have two outstandingdebt consolidation loans: one for $18,000 and thenew loanfor $24,000.

Whether or not this is a wise decision depends on your personalfinancial situation. Debtconsolidation optionscould offerlower monthly paymentsand makebudgetingeasier since you’ll havefixed-ratepayments. You’ll know what the exactmonthly billwill be for yourdebt payment, and there is no worrying about compounding interest.

But, there are a few factors you need to consider before determining whether an additionalconsolidated loanis right for you.

Monthly payments

The most important thing to consider when asking, “Can you have twodebt consolidation loans?” is whether you can afford to do so.

For instance, in the example above, you are taking out two loans of $18,000 and $24,000. Though you are using this to pay outstanding debt, you are ultimately committing to $42,000 innew debtthat has to be paid back within a certain time frame.

You may receive alow interestrate that saves you money in the long term, but you should make sure you can afford the monthly payments on the loans in the short term.

Short-term hit to yourcredit score

When you open the loan, yourlenderis going to have to look at yourcredit report. Doing so requires a hard inquiry into yourcredit history. This is the case for allborrowers.

Whenever alenderlooks at yourcredit report, the hard inquiry will lower yourcredit scoretemporarily. But if you make on-time payments, you should quickly begin tobuildgood creditas you reduce thetotal amountof your outstanding debt.

Eligibility

Another consideration when taking out twodebt consolidation loansis that you may not be eligible for the second one. You often need to have at least average credit for alenderto approve you for apersonal loan.

Attempting to take out a second loan could raise red flags, especially if they see that you are behind on other payments.Lendersmay not necessarily be willing to loan to you again — especially if you have fallen behind on your firstconsolidated loan.

Fees associated with the loan

There is a strong chance that you are going to have fees with yourdebt consolidation loan. You probably paid them once with the first loan. The fees depend on yourlenderbut can include:

• Annual fees.

• Closing costs.

• Balance transfer fees.

• Loan origination fees.

Additionally, there may be fees associated with paying off your loan early. Yourrepayment termsmay stipulate that you can’t pay off the loan before a certain period of time without facing prepayment penalties. For example, if you have a 36-month loan, you may not be able to pay it off within the first 18 months without being charged a fee.

Tax-deductible benefits

The interest payments you make on some loans, such asstudent loans, may be tax-deductible. However, if you pay down the balance with adebt consolidation loan, you lose these benefits. The IRS says that theinterest payments on apersonal loanare not deductible in most cases. So, you may end up owing more at the end of the year as a result.

What are some alternatives todebt consolidation loans?

If you do not feel that taking on a seconddebt consolidation loanis in your best interest, there are a couple of alternatives that you can consider. These include:

• Negotiating a with your lender.

• Debt settlement

• Balance transfer credit cards

Another option you have is to utilize acredit card payoff app like Tally. Tally automatically pays down yourcredit card balanceseach month in the most strategic way possible. You will not missmonthly payments, which may keep you in good standing with yourcredit card company. Tally takes the guesswork out of paying off yourcredit card bills.

​Should you secure twodebt consolidation loans?

If you’d like to secure twodebt consolidation loans, it’s possible. There are no laws preventing you from opening a second. However, you will have to find alenderwho is willing to offer you the second loan.

Furthermore, there are financial implications that come with opening a secondpersonal loanfor debt consolidation. You are taking on a significant amount of debt, though it may come with alower interest rate. Also, you may also lose tax benefits or owe more in fees. And yourcredit scorewill likely take a short-term hit.

Should you choose not to open a seconddebt consolidation loan,look instead to Tally. Tally is a service that automatically pays down yourcredit card balancesin the quickest and most efficient way possible, helping you to get out of debt.