Joint personal loans: what you need to know

25/05/2020
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A joint personal loan has plenty of benefits over an individual application, but there are risks to it too. We’ve broken down what you need to know in this quick guide.

 

Read more: The Avanti Finance Personal Loan Guide: Everything you need to know about receiving, spending and repaying personal loans.

 

WHAT IS A JOINT APPLICATION PERSONAL LOAN?

A joint personal loan is just like a regular personal loan, but two (or more) people are responsible for the debt.

Usually, this will be a husband, wife or partner, a close friend or a family member.

All of the ‘co-borrowers’ are jointly responsible for the debt. This means that if one co-borrower can’t meet their side of the repayments, the other co-borrower(s) have to make up the difference.

 

WHY TAKE OUT A JOINT APPLICATION PERSONAL LOAN?

One of the most common joint personal loans is a mortgage, where a couple owns the home together and pays off the loan together. It isn’t the only time a joint loan is suitable though. Sometimes friends want to buy a car or a boat together, parents and children go halves on a wedding loan, or a couple takes out a joint debt consolidation loan.

Taking out a joint personal loan for any purpose comes with a lot of positives compared to making an individual application, including:

  • You can borrow more together than alone.
  • Your application is more likely to be approved.

Remember that all co-borrowers still need to meet the loan criteria though. If someone has a low income, a poor borrowing history or a lot of existing debt, it may be more difficult for your lender to approve a joint personal loan.

If your partner, friend, family member or other potential co-borrower is in this situation, we recommend taking a look through either our guide to credit scores to see if they can fix it, or reading up on our complete guide to personal loans.

 

WHAT TO LOOK OUT FOR WITH A JOINT APPLICATION PERSONAL LOAN

There is a lot of responsibility that comes with a joint personal loan. If one person is unable to make their part of the repayments, the other co-borrower(s) have to make up the difference.

This means it’s very important to carefully consider who you are co-borrowing with. Do you trust them to be able to make the repayments? Do they have good financial habits? Do they have a stable job with consistent income?

Sometimes, life just happens, and you or your co-borrower(s) could find yourselves unable to make repayments through no fault of your own. Your lender should work with you to manage this, but it’s best to start with the right co-borrower just in case bad luck hits.

 

SUMMARY

Pros

Cons

Greater chance of approval.

You have to rely on the other person to make repayments

You can borrow more.

You could be liable for the entire loan if your co-borrower(s) don’t meet their obligations.

If ‘life happens’, co-borrower(s) have someone to fall back on.

If one co-borrower has poor credit, you may still be refused a loan.

 

Ready to begin a joint personal loan application? Get started with Avanti Finance.

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