Sometimes you may face a situation where you are in need of two car loans simultaneously to meet your requirements. So, is it possible to have two car loans at the same time? Regardless of what the circumstances are, the simplest answer to the question is that it is possible. You can keep your existing car and go for either a mortgage option or directly can take a loan from any financial institution.
There are a few things that need to be considered before making a decision in order to take two loans at the same time:
Your Credit History
The first and foremost thing that any financial institution will consider before giving you a loan is your credit history. Usually, officials may get a credit report that will depict your credit history.
- If your previous history is good then you will be given the second car loan.
- But if it is not good then you may be refused.
Proof Regarding Your Income
The financial institution will take your income statement to predict your credit feasibility. So, your income is the best proof for you to take the loan.
- Your income will show the incoming and outgoing of cash.
- In addition, it will also determine whether you can carry two loans at the same time or not.
Income To Debt Ratio
The best criteria to judge your income performance is to calculate your income to debt ratio.
- If your debt ratio is 50% or more to your income then it is most unlikely that you may be given another car loan.
- Similarly, if your debt ratio is less than 50% to your earned income, you may be considered for getting two loans at the same time.
Avoid the Straw Purchase
A straw purchase is known as a purchase in which you buy a car for someone else but the loan is issued in your name. This kind of loan is strictly prohibited and declared illegal. Some well-renowned institutions call it fraud. Therefore, the best way to avoid such type of mistake is that you should make that person a co-signer in the agreement.
Why Straw Purchase Is Illegal?
- The simple reason behind this dilemma is that the other person for whom you take a car loan will not be liable to own that car. You will owe that car as long as all the accounts have not been settled with the loan provider.
- And the other reason is that the car is reflected as collateral. It means the car is the core reason for which you take the car loan. If you do not own it, they have a right to turn down the car loan at any time.
So, you can avail of two car loans at once but if you meet all the requirements stated by the loan provider. Circumstances may vary depending upon the terms and conditions set by the loan provider.
Reconsider Interest Rates
Furthermore, you can review the current interest rates before taking the second loan, as generally the interest rate in the second loan may well be higher than the previous one due to inflation or any other reason.