If you are finding it difficult to apply for a loan by yourself, you may be interested in joint loans. This type of loan can be taken out by you and your spouse or partner, and can include mortgages, joint debt consolidation loans, or joint account overdrafts. Instead of only you applying for and repaying the loan, both of you are jointly liable to repay the debt, which might make managing the debt a little easier. In this guide, we will be sharing lots of information about joint loans so you can decide whether they are right for your needs.
What Is A Joint Loan?
A joint loan is applied for, used, and paid back between a number of people. This type of arrangement is usually designed for two people who may be a couple, family members, or business partners. However, in the case of mortgages, as many as four people could apply for a joint loan.
By borrowing with someone else, you may be able to secure a larger loan at a lower rate. This is usually because lenders may see joint applications as less risky since they are not solely relying on a single borrower to repay the debt. All of the borrowers involved will be liable to repay the debt, but if one person cannot pay back their share, the other will become responsible for repaying the whole amount.
Who Can Share A Joint Loan?
Applying for a joint loan is not something to do without careful planning and consideration first. You need to ensure that everyone involved in the application feels confident about repaying. Therefore, you should think about the person you are borrowing with before you sign on the dotted line. You may be able to take out this type of loan with:
- A friend
- Your partner – you do not need to be married or in a civil partnership
- A family member, such as a parent or sibling
- Business partner – you may consider taking out a specific joint business loan
While you may feel comfortable with applying with your chosen borrower, there are a few questions to consider first:
- How reliable are they?
- How long have you known them?
- How much do you know about their finances?
- Do you trust them?
- If they lost their job or could not work, what would happen?
What Is The Eligibility Criteria For A Joint Loan?
Every lender has different eligibility criteria that you will need to meet in order to apply with them. Usually, your new lender will look at your credit history to see how likely you are to repay the debt. The better your credit history, the better chance you have of securing the loan. If you have a good credit score, you may able to secure large loans with low interest rates, but if you have poor credit, you may find that the rates are quite high.
When making a joint application, all parties involved will need to fill in their details as the lender will need to see both credit histories. As you are jointly liable, the lender will want to assess whether each person is able to afford the repayments. Because of this, it is important to have an open discussion with the other applicant about your credit before applying.
If you need any further information about joint loans and the available alternatives, do not hesitate to reach out to the Money Advice Service.