A second loan is a type of loan that allows you to borrow money against the value of your home. The interest rate is usually lower than the interest rate on a credit card or other unsecured loan, making it a good option if you need to consolidate debt or make a major purchase.
Unlike a first mortgage, a second personal loan does not require collateral, so if you default on the loan, your lender can't take your home. However, if you have equity in your home, you may be able to get a lower interest rate by using a second personal loan to consolidate debt or make a major purchase.
One of the most asked questions about a second personal loan is whether it's best to get it from your existing or previous loan provider. Although the answer will depend on how your previous loan went, there are some benefits you can enjoy in getting your second loan from the same lender.
Better Offers Based on Your Previous Payments
Acquiring a second loan from the same lender as your first loan can provide many benefits.
One of these benefits is unlocking amazing offers provided by the lender, given that you have a good payment history on your previous loan. It's why approaching your existing lender if you plan to acquire a new loan is highly recommended. You will be able to get approved with the loan that you are applying for easily and quickly than getting it from a new loan provider.
You might also obtain extra benefits that a lending institution only provides to previous or existing borrowers.
Might Acquire Better Interest Rate
Being a recurring borrower doesn't assure you a good personal loan rate. However, if your credit history is strong and you're a strong loan applicant, this, combined with the fact that you've worked previously with your loan company, could pave the way for a decent bargain.
That's also why you should ensure that you will pay your loans on time to increase your chance of getting the best interest rate once you acquire a loan again in the future.
You Already Know What to Expect
Working with one lender from your first loan to the next will give you an idea of what to expect. Each lender has a different way of processing loan applications and has different requirements.
It'll be less stressful for you if you take your new loan from your existing lender, as you are already aware and accustomed to the processes. You will be able to acquire the necessary documents and other requirements ahead of time since you already know what it is.
The Application Could Be Faster
As a result of being familiar with the process and the requirements, applying for a second personal loan from the same lender can offer you faster application processing. It's because the lender already knows you and has become familiar with how responsible you are in repaying your loan. Thus, the approval process of your loan application will go quickly.
How to Apply for A Second Personal Loan
Now that you are familiar with the benefits, you can enjoy taking out a second personal loan from the same lenders. You might want to consider getting one if you badly need more cash. Here are the things you should remember when applying for a second personal loan.
Know if You Are Still Eligible to Apply with Your Current Lender
Acquiring a second loan from your existing lender can be beneficial. However, given your previous loan situation, you must first know whether you are eligible for a second loan from the said lender.
Look for The Best Option
If you aren't eligible for another loan from your current lender, you should look for an alternative option. Ensure that you choose the best lender to provide you with a second personal loan. You can check out CreditNinja and see their loan offerings that suit your needs.
Apply for the Loan
Once you've figured out the best lender for you, whether it's your current or a new lender, you can now start the application process. First, apply for the loan following your instructions according to the lender's lending process. Then, gather all the requirements and fill up all necessary forms.
Things to Consider Before Taking Out a Second Loan
Taking out a second loan can be tempting. Although it helped many borrowers, you still need to examine your situation and consider things like:
It Will Have an Impact on Your Credit Score
Having multiple loans will have an impact on your credit score. For every loan you apply for, a hard inquiry will be performed on your credit record, which causes a decrease in your score. A hard inquiry usually lasts up to two years on your credit history.
You Could Be Trapped In Debt
Too many loans will cause you to fall deeper into debt and get trapped. It's always best to repay any existing debts first. Then, you acquire an additional loan. However, if it's really necessary to get a second loan, like in case of an emergency, you should ensure that you pay it on time.
Are You Ready to Apply for A Second Personal Loan?
With all the information you have acquired, are you ready to take out a second personal loan? Remember, if you decide to push through a second loan, taking it from your existing lender would be more beneficial as long as you are eligible.