Yes, you can have two car loans at once

It’s relatively simple to finance a car. But can you have two car loans? Yes, but getting a second loan when you’re still making payments on your first can be a bit more challenging. You will need a strong credit score and adequate, stable income to cover the monthly payment on both car loans.

What to prepare for when taking out a second car loan

Even if you plan to sell your current car privately once you get a second vehicle, you could face roadblocks when you apply. Furthermore, insurance costs may be higher. After taking out the second loan, you could also be denied credit from other lenders or creditors.

Increased scrutiny from lenders

To decide if you’re a good fit for a car loan, lenders evaluate your:

  • Creditworthiness
  • Current debt load
  • Payment history
  • Income

You will also be asked to provide detailed information about the vehicle so they can determine if the sales price is reasonable or more than what the car is worth.

Maybe you’re wondering, “Can I finance two cars with bad credit?” There is even more scrutiny when you take out a second car loan. Since you are trying to add more debt to your plate, the lender needs reassurance that you have the means to make timely monthly payments.

The lender will look at your debt-to-income ratio, or DTI. The debt-to-income ratio shows how much you’re paying in bills vs. how much money you are bringing in. Lenders know your first car loan increases your DTI, and the second loan will increase it further. You can find your debt-to-income ratio using our DTI calculator. You could be denied financing if your debt load is high for your income.

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Additional insurance costs

Your auto insurance premiums will increase when you add a second car to your policy. The process of adding a second vehicle is relatively simple and quick. When you call the insurance company, be sure to have this info handy:

  • Vehicle identification number (VIN)
  • Year
  • Make
  • Model
  • License plate number

Some providers also offer discounts to customers who insure two or more vehicles on the same policy. It’s referred to as a multi-car discount, and you must register and park all your cars at the same address to qualify.

Difficulty finding credit after securing the loan

Unfortunately, your credit score may take a temporary hit when you take out a second car loan, making it difficult to qualify for additional credit in the short term. Each time you apply for financing, a hard inquiry is generated. If you want to avoid multiple hits to your FICO score, keep all your auto loan applications within two weeks.

Creditors and lenders assess your creditworthiness when you apply for debt products. A higher score means you pose less of a credit risk and could get approved for a credit card or loan product with favorable terms. But a low score could result in a denial or higher interest rate.

How to improve your chances of getting a second car loan

Here’s how to increase your approval odds if you’re looking to finance another car:

  • Dispute credit report errors. Inaccurate information could be dragging down your credit score. Visit to get a copy of your credit report from the three major credit bureaus — Experian, TransUnion and Equifax. Review each page and circle any errors you notice. Once you’ve reviewed all three, file disputes with the appropriate credit reporting agency promptly.
  • Pay down revolving debt. Ideally, you should have a steady source of income that is more than enough to cover your monthly debt payments. The payments for installment loans are set in stone, but you can get a lower minimum payment on your credit cards and improve your debt-to-income ratio by paying down the balances. Look out for signs that you have too much debt.
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The bottom line

It’s possible to take on a second car loan, and there are steps you can take to help you get a good deal. Get a copy of your credit report, view your score to see where you stand and consider paying down revolving debt if your debt-to-income ratio is high. Ultimately, you want to prove to the lender that you’re a good credit risk and deserve to be approved for a second car loan with a competitive interest rate.