Unfortunately, financial planning doesn’t always go to plan and you may need to borrow more money on an existing loan to cover unexpected costs.
Things often end up costing more than we anticipate – especially if borrowing for a large purchase.
If you need an influx of cash quickly, you could be eligible to top up your loan. It's important to consider your financial situation when borrowing any amount of money - be sure to have a plan in place to pay back the loan.
Can I borrow more money on an existing loan?
In most circumstances, yes - lenders are generally willing to lend more money on top of your initial loan arrangement, subject to affordability.
As you have already taken out your initial loan, your lender is already satisfied with your credit history and ability to repay your original loan. Often for the lender it’s just a case of finding out the up-to-date details and then looking at the best way of lending the extra money.
Consider how borrowing additional money will affect your finances overall. Remember, you’ll have a larger sum to pay back and more interest to repay, as well as any additional repayment charges.
Why borrow more money on an existing loan?
It’s difficult to budget for every possible scenario or outcome, so sometimes you might need a little extra breathing space when it comes to your finances.
Renovation cost - home improvements may be taking longer than expected or costing more than you’d budgeted for. You can borrow more money to ensure the work is completed.
Large one-off purchase – your next car may have additional features causing the overall price to be higher than you’d expected. You can borrow extra money to ensure you can afford the asking price.
Special occasion - planning the perfect wedding can come with many bumps in the road and costs quickly add up. You could be eligible to borrow more money to cover your dream wedding.
What can't I borrow extra money for?
Lenders will want to know why you’re borrowing extra money on your loan and may have limitations on what you can spend it on - such as buying a property or for business purposes.
How to borrow more money on an existing loan
There are two main ways you can arrange to raise more money from an existing loan arrangement – a top up loan, or an additional loan from the same provider.
How does a top up loan work?
A top up loan is when you apply for more money to be added to your original loan. Lenders will close your existing loan and create a new one for the higher total amount you’ve requested.
Early repayment charges may apply so the lender can close off the original loan. Remember that a loan top up also extends the term of the loan, which could result in a higher total amount payable at the end.
How often you can top up your loan and when depends on your specific lender and your individual circumstances.
Can I take out an additional loan?
Instead of combining loans, you can get more than one loan. You may be offered the choice of taking out a new separate loan with the same provider.
If you opt for a second loan instead of a combined loan, the initial loan will still have its original interest rate. In some cases, this could be lower than a larger interest rate on a bigger loan.
The new loan will have its own new terms and rates. You’ll need to budget for two monthly repayments and interest rates to pay instead of one. Be sure you can still afford repayments on the original loan as well as your new one.
Can I have more than one loan with the same lender?
It’s possible to take out more than one loan, but the conditions depend on the lender. Some lenders are happy to lend multiple loans simultaneously, whereas others may refuse additional loans. Some may insist the original loan is cancelled and replaced with one large loan, while others may need you to show the initial loan is being maintained successfully first.
Can I apply for multiple loans from different lenders?
Although technically possible, we recommend you don’t apply for multiple loans from different lenders at the same time because it could negatively affect your credit score.
Lenders can view your credit history, and applying for multiple loans at once could give them the impression you’re a risky proposition for borrowing. Lenders won’t look on your application for a top-up loan less favourably, but for the best chance of an affordable rate it might be worth focusing on improving your credit score.
When comparing rates between companies to decide which lender to go for, some may offer a “soft credit” check. This won’t affect your rating, but it’s a good way to look at your borrowing options.
Check out our Know How guide for help with managing your money, along with tips, advice and guidance on your finances.