‘We want you back’.
This was essentially what the lending company told writer Mike Cetera shortly after he had paid off his personal loan. In his recent Bankrate article, Cetera discussed the possible merits and risks a second personal loan may entail, and how the varying policies of creditors may be pulling uninformed borrowers into financial holes deeper than what they previously got out of.
Remi Harrad, a spokeswoman for online lender Prosper Marketplace, responded to Cetera’s inquiry on whether lenders are particularly lenient towards repeat borrowers by confirming that ‘there is no impact to apply (or re-apply) because credit pulls are not marked as a 'hard inquiry' until the person originates the loan’.
Simply put, it is up to the borrowers to prepare for a second background/credit check, as it will happen (at least for most companies) as the second loan itself is already on the way to their coffers. Harrad clarifies that since loan inquiries are only valid for 30 days, it should come as no surprise to repeat borrowers that they will have to prove their capacity to make repayments once more, to avoid loan defaults wherever they may spring.
But professionals from Rapid Loans remind borrowers that the adage, ‘just because you could don't mean you should’ applies to personal loans as well. They say that while it is possible for lenders to disregard their varying ‘waiting time’ policies to cater to particularly punctual borrowers, the hitch with going back for seconds comes in the form of a financial record that does not inspire confidence.
‘Those who repeatedly 'go back to the well' for these products do so, it would appear, due to constrained finances’, a TransUnion research paper revealed. The researchers also warn lenders against tending to repeat borrowers, as it may also put their company in a bad light in the sense that they are fostering the creation and sustenance of debt cycles.‘
Loans, for all the demands and legalese, are still a highly effective means of recovering from a financial crisis. Of course, having a helping hand for one instance does not, and should not, mean that the helping hand will be as helpful the second time around.