How soon after paying off my last personal loan can I get another loan?

You’ve reached the final lap of your personal loan and can see the finish line only a few repayments away. However, an unexpected bill, urgent home repair, changed holiday plans, or the need for a new car means you want another personal loan.

So, can you take out a personal loan while you’re still paying one off? How soon after paying off your last personal loan can you apply for a new personal loan? Let’s explore these scenarios today.

Qualifying for a personal loan

To get a better idea of how soon you can apply for a new personal loan, it’s important to know how to best boost your chances of being approved for the loan.

Depending on the lender, a personal loan provider may not necessarily mind that you currently have a personal loan, or that you’ve just finished paying one off. As long as you meet the lender’s eligibility criteria and can responsibly service the loan.

A personal loan lender will assess your application based on a few key factors to determine whether you can afford to service the loan (make the loan repayments).

These key factors for personal loan assessment typically include: 

• Personal identification showing you are over the age of 18 and an Australian citizen or permanent resident;
• Good to excellent credit history;
• Proof of income (payslips, tax returns);
• Details of expenses (bank statements, rental logs, mortgage repayments), and;
• Details of assets (property, shares etc.).

A personal loan lender will compare the amount you wish to borrow against your income and your expenses and liabilities, which may include any existing personal loans. If you were currently repaying a personal loan and the lender calculated that you may not be able to service an additional loan and its repayments, then your application may be rejected.

If you had just finished paying off a personal loan, a lender may not hesitate to approve you for a new personal loan, assuming you meet its eligibility criteria. However, any debt you take on will be saved in your credit history. Having frequent credit applications in your history may appear risky to some lenders, especially if you’ve had issues making repayments on time in the past. Making multiple applications all at once could risk seriously hurting your credit score.

When should you wait before applying for a new personal loan?

A lender may choose to approve you for a new personal loan right after paying off an existing personal loan at their own discretion, based on your individual financial situation. But there are some circumstances in which you may want to consider holding off:

Your income has decreased

Just because you were previously approved for a loan of a certain amount of money doesn’t mean a lender will automatically approve a second, especially if your financial circumstances have changed. A job loss or a decrease in household income may affect your application, as you may not be able to service the loan repayments as easily.

You could consider waiting until your income has increased again, or apply for a smaller loan amount to help boost your chances of approval.

You’ve started a new job

Getting a new job is always exciting, but even with an increase in income, it may affect your chances of personal loan approval. Lenders look for stability in your finances and being employed with one company, or in the one role, for at least 3-6 months may help to improve your chances.

If you’ve just started a new job, it may be worth waiting until your probation period is over at least until you apply for your new personal loan.

Your credit score could be better

Whether you’ve closed a credit card account or experienced an adverse event, changes to your credit history can affect your chances of personal loan approval. While some lenders may offer personal loans to Australians with poor credit history, a good to excellent credit score is preferable.

If you’ve just paid off a personal loan, then the chances are this positive event might boost your credit score. It may be worth waiting until this is reflected in your credit history and credit score before applying. You could also consider taking steps to increase your credit score before applying for your next personal loan.

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