Taking Out Your Second Personal Loan? Here Are the Pros and Cons of Using the Same Lender Again

Using the same lender again could be a mixed bag.

When a need to borrow money arises, your goal should be to pay as little interest on that sum as possible. And a personal loan could be your best bet.

Personal loan rates tend to be competitive -- and considerably lower than the interest rates you'll pay on a credit card balance. Personal loans also tend to close quickly. In some cases, you can have your money within days of getting an application approved.

Another benefit of personal loans is flexibility. You can use proceeds from a personal loan for any purpose, whether it's fixing up your house or starting a business.

Now, it may be that you're already familiar with personal loans because you've taken one out in the past. If the need to borrow money arises again, you may be tempted to work with the same lender you used originally.

That's not necessarily a bad call -- but it's also not necessarily the right one. Here are some of the pros and cons of using the same personal loan lender again.

Pro No. 1: You know what to expect

Each lender has a slightly different process when it comes to applying for and qualifying for a personal loan. If you use a lender you've worked with already, you may find the process less stressful because you've been through it before and know what to anticipate.

Pro No. 2: You may get a better rate as a repeat borrower

Being a repeat borrower won't guarantee you a competitive rate on a personal loan. But if your credit score is solid and you're a strong applicant, that plus the fact that you've worked with your lender before could set the stage for a really good deal.

Con No. 1: Your lender may not have the best rates

Just because you have a pre-existing relationship with a lender doesn't mean it has the best deal in town. It's important to shop around in the course of getting a personal loan, because you may find that another lender is able to make you an even better offer. Incidentally, this is something worth doing any time you're borrowing money, whether it's a personal loan, a mortgage, or a home equity loan.

Con No. 2: Your lender might charge higher fees

When you take out a personal loan, there are different fees that come into play, like origination fees and application fees. These fees are generally at your lender's discretion -- and yours might impose higher fees than another. When exploring personal loan options, it's important to look beyond the interest rate on your loan and consider the costs of obtaining it. You may find that it's worth working with a lender with a slightly higher interest rate because you'll pay fewer fees.

What's the right call?

It's natural to assume that working with the same personal loan lender again is your best bet. But it may not be. Spend a little time doing research so you can feel confident you're getting a competitive personal loan offer -- no matter who you end up signing with.