Can you have more than one car loan at the same time?

If you’re thinking of turning your home into a two-car household, you may need finance to afford that second set of wheels. But is it possible to hold two or more car loans at once, and what effects could this have on your finances?

How many car loans can you have? 

It is possible to have two car loans. It’s also possible to have more than two car loans. In theory, you can have as many car loans as you want, provided your household budget can comfortably accommodate them.

That said, the more debt you already hold, the less comfortable a lender may feel about you borrowing more money, in case your budget is stretched to the point where you can no longer pay it back. If you have a high debt to income ratio (e.g. you owe much more money than you earn annually from your job), it may be much harder to get a loan approved.

This is why car finance providers need information about your finances when you make a car loan application, and also why they conduct credit checks.

What do you need to apply for a second car loan? 

Applying for your second car loan will likely involve a similar process to your first car loan. While the exact lending criteria will depend on the lender, some of the common requirements include:

• Personal information: Your name and address from your driver’s license or similar identification
• Information about our income and expenses: Bank statements and similar documents
• Car details: Make, model, age, condition etc. If you’re applying for a secured car loan, you may need to be purchasing a car of a minimum value to secure the loan.
• Assets and liabilities: Details of valuables you own (e.g. your house, other vehicles) and debts your owe (e.g. other car loans, personal loans, home loans and credit cards)
• Credit check: Looking at your history of borrowing and repaying money

Keep in mind that if you only applied for your first car loan recently, applying for a second car loan not long afterwards could lead to trouble for your credit score. Each credit application you make is recorded in your credit file - when a lender conducts a credit check, if it sees that you’ve only recently applied for credit, it may take this as a sign that you’re struggling with your finances and desperate for credit, which could see your application rejected.

To get a better idea of how car finance providers and other lenders see you as a borrower, you could consider accessing your credit scores for free.

How can you improve your chances of being approved for a second car loan?

The chances of your car loan application being approved or turned down will depend on the lender and your financial situation, though there are a few steps you could consider taking to help improve your chances, such as:

• Maintain a low debt to income ratio: See if you can pay off other loans and/or cancel your credit cards, and look for ways to increase or supplement your income.
• Maintain an excellent credit score: Making sure you always pay your debts on time and generally keep on top of your finances can help to improve your credit score.
• Consider a secured car loan: A finance company may feel more comfortable about approving a car loan application if it’s confident it can recover its money if you can’t pay it back by repossessing and selling the vehicle.

Keep in mind that there may also be alternative options to taking out a second car loan, such as refinancing your mortgage to borrow more money or to access a line of credit.

Whenever you apply for a car loan, it’s important to compare the available options to get a better idea of which choices may best suit your needs.

Compare car loans in Australia