Can You Have Two Car Loans At Once?

, can you have two car loans at once

When purchasing a car, the process can be daunting, especially if it’s your first time. However, it’s fairly simple and straightforward. That is, as long as you have decent credit. First, you find a vehicle that fits you and your monthly budget. Then, after settling on a price and putting some money down and/or trading in another vehicle, you’ll sign off on a loan. This will likely be handled by the dealership. Then you’ll drive your new-to-you car right off the lot.  But, what if you’re buying two cars at once? How about if you’re buying another car before your other vehicle loan is paid off? Can you have two car loans at once?

Can You Have Two Car Loans at Once?

You may find yourself in a situation where you may need to have two car loans out at the same time. Whether you and your spouse both need transportation to work, or one of the kids is going off to college, there are times when the only solution is buying another vehicle. However, you’re likely wondering if you can afford a second one, or if it’s even possible to carry two car loans at once. Whatever your personal circumstances for needing the second car loan, the answer is typical of most finance questions: it depends.

As with any loan, your approval comes down to a number of factors; mainly, your credit. Let’s break them down.

Getting Approved for Two Car Loans

There are a few key factors that will be considered for multiple loans. Here’s what lenders look at when evaluating your application:

1. Credit History

Not surprisingly, one of the first things a banker or lender will look at will be your credit history. They will obtain and review your information, which will include your credit score, repayment history, other loans on file, inquiries, and all public records pertaining to your credit.

This is the primary source of information banks use when deciding to give you a second loan. Keep in mind though, that even if the bank approved the first loan, it does not mean this second will go just as smoothly. Each application is reviewed based on your current circumstances and market conditions.

2. Proof of Income

In addition to credit history, those loaning you the money will want to see proof of income, for obvious reasons. Lenders need to know that you can repay the loan according to the terms they are offering. Therefore, providing proof of income shows them that you have money coming in regularly and gives them assurances that you won’t default on your loan. Most institutions want to see that you have worked for the same employer for at least two years, or have another steady source of income that will cover payments.

3. Debt to Income Ratio

Other factors that banks look at when you apply for a second car loan may also include your debt to income ratio. If your debt ratio is 50% or more, you may have trouble getting approved for a loan. This is true even if you have a good salary. Writer and real estate investor Michael Bluejay notes on his website that each bank differs. But in generous cases, your bank may permit you to have a 42% debt ratio. You can find out how to calculate your income to debt ratio here.

4. Down Payment

Any reputable dealership will require a down payment before you drive off the lot. Lenders want some guarantee that they will recoup at least partial value of the car if you default on your loan. Therefore, most require at least a 20% down payment. However, if you make a larger down payment, some lenders may overlook the less favorable aspects of your credit history. A bigger down payment means a smaller loan, and therefore, less risk they will lose money.

5. Pre-approval Options

Although you may have to talk to several banks, credit unions, or dealerships, look for one that offers pre-approval. It is better to know that you have the funding before you start car shopping rather than finding the car you want but not having the money to buy it. And, having a letter of pre-approval gives you more leverage. It demonstrates to the dealer that you understand your financing options and allows for better negotiation on price.

Things to Keep in Mind

Be aware of the “straw” purchase.

A “straw” purchase is when you buy a car for someone else, but put the loan under your name. This is considered bank fraud, and thus, it’s illegal. One reason for this is because a car is considered collateral. If you are trying to purchase a vehicle for a loved one, you should sign as a co-signer or give them cash to put toward their purchase. They are not able to own the car if the loan is under your name. However, if the individual is your dependent, then it is a different story since you would accept ownership and responsibility for the car.

Having multiple loans is a huge financial burden.

Taking on two car loans at the same time is a huge financial responsibility. Not only will you have the additional payment each month, but it will also affect your credit. Your credit score will take a hit and temporarily lower after you take out the loans. You can recover from this as long as you don’t miss your payments, but it does take time.

Furthermore, you will also have a higher debt-to-income ratio. This will make it more difficult to obtain good rates from future lenders. It will also make it difficult to improve your credit score with such a heavy financial responsibility. However, those with good credit, limited debt, or a strong income likely won’t be as affected. Although a second loan may not impact your situation much, it is still wise to think through all your options before signing anything.

Ask yourself if you need the loan.

Reconsider the loan to save on interest if you can pay straight cash. If you don’t plan to use the car as a daily driver, it may not be worth taking out a loan. If you only want it to shuttle people around or for limited driving purposes, there may be better options than going deeper into debt.


So, can you have two car loans at once? Yes, but not without meeting some basic requirements. Cases and circumstances do vary. So, you want to make sure you would even qualify for a second loan by speaking with a few lenders before picking out that next car. You’ll also want to review the interest rates you would receive as they might be higher depending on your current loan status.

Have you ever had to take out more than one car loan at the same time? Share your experience in the comments below!

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One thought on “Can You Have Two Car Loans At Once?

  1. yes, I have taken a car loan for my friend because he was not eligible to apply for a car loan, but later I also needed a car for myself so at that time I applied for my second car loan. Because my Credit history and monthly Income was good therefore I got the loan easily.

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