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While having a credit card that two people share can help fund larger expenses you don’t have the immediate cash for, borrowing limits can be low and interest rates can be high. This is where a personal loan can help. And if you’re looking to get a personal loan with more than one borrower, you can apply for a joint personal loan.
While joint personal loans function similarly to personal loans for an individual, there are some differences in how you qualify, who is responsible for repayment and who has access to the money. It’s important to understand the eligibility and repayment requirements before you apply. So let’s go over all things joint personal loans and how you can get one.
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Joint Personal Loans Explained
A personal loan is usually an unsecured loan (no collateral needed) that allows you to borrow money from a lender and repay it in fixed monthly payments over time, usually 2 – 7 years. A joint personal loan is a personal loan that has two or more borrowers.
With joint personal loans, both borrowers’ creditworthiness and incomes are assessed in the application process and both borrowers have access to the money.
Applying for a joint personal loan may also help you qualify for a larger loan amount than if an individual borrower was to apply. Personal loans are usually offered up to $50,000 but some lenders may extend up to $100,000.
How can joint personal loans be used?
Joint personal loans can be used for just about anything, although some lenders may have limitations. Remember that a joint personal loan should help you and your co-borrower achieve your goals (whether they be financial or personal), not add to an already existing debt problem.
Here’s a list of some of the ways a joint personal loan can be used:
- Large expenses like home renovations, weddings, vacations, etc.
- Large one-time purchases like a backyard shed, a pool, an ATV or new furniture
- Debt consolidation, especially for paying off higher interest rate debts
- Medical bills not covered by insurance
How is a joint personal loan different from a co-signed loan?
A joint personal loan that has co-borrowers is different from a personal loan that has a co-signer. The difference between these two types of individuals is:
- Co-borrower: Their name is on the loan agreement. They are equally responsible for repayment and allowed to access the funds.
- Co-singer: Their name is not on the loan agreement. They just help a primary borrower qualify. They are only responsible for repayment if the main borrower can’t, but they are NOT allowed to access the funds.
Both a co-borrower and a co-signer can help you qualify for a loan, but a co-borrower has more investment and ownership in the loan than a co-signer.
How To Qualify for a Joint Personal Loan
Lenders will decide to give you a joint personal loan by looking at both borrowers’ credit scores, credit history, income and debts:
- Credit score: A credit score of 670 or higher will get more favorable terms but some lenders work with lower credit scores. Although, having poor credit usually means you’ll end up with higher interest rates.
- Credit history: Lenders will look at your credit report to see how responsibly you manage the accounts you currently have. Having a history of on-time payments is one of the most important factors.
- Income: Lenders will look at your income to determine if you’ll be able to repay the loan. This means they also look at your debt-to-income (DTI) ratio to see what other debts you are responsible for and if that may affect your ability to repay the loan you’re applying for.
Although these are the main qualifications lenders look at, some lenders may prioritize other data like your education, your employment status and where you live.
Sometimes, if you don’t qualify for an unsecured personal loan, a lender may require you to get a secured personal loan. This means you and your co-borrower will have to place collateral on the loan (based on the lender’s requirements), which can be taken by the lender and sold to recoup losses if you default on your loan repayment.
Who can be a co-borrower?
There aren’t always strict requirements on who can get a joint personal loan, but ideally your co-borrower should be someone who is involved in the reason you’re applying for the loan. You don’t have to be married to get a joint personal loan, but some lenders may require you to live at the same address. Just make sure you read the loan terms carefully before you move forward.
When you’re choosing a co-borrower, look for someone who has a good credit score and credit history. Having a co-borrower with credit stronger than yours can help you qualify for better loan terms.
You’ll also want to make sure it’s someone you trust, and who trusts you. Being open and transparent about your financial situation can save you from potential issues during repayment (like if someone loses their job or you part ways). If the relationship between co-borrowers does sour before the loan is paid off, you should have a backup plan for how you’ll approach repayment for the rest of the loan.
Can you get a joint personal loan if one borrower has bad credit?
If one borrower has bad credit, your chances of qualifying can be negatively affected – or even disqualify you. One borrower with bad credit may also affect the loan terms you receive. For example, the lender may give you a higher interest rate because both credit scores aren’t good, or the lender may require you to get a secured loan.
So while you may be able to get a joint personal loan if one borrower has bad credit, it may not be the best idea.
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Pros and Cons of Joint Personal Loans
Consider this list of benefits and drawbacks of joint personal loans to help you decide if they are the right fit for you.
You may find that you get better terms (like interest rates) with a joint personal loan over applying individually because your qualifications are combined.
Since your incomes are combined, you may qualify for higher loan amounts than if you applied on your own.
This might be a great way for two people to access the money if you’re both working on something together.
You may receive loan approval in a matter of minutes or just a few days.
Both borrowers are responsible for repaying the loan. So if one can’t, the responsibility falls on the other.
It may be harder to get a joint personal loan if one borrower doesn’t meet the qualifications.
Finances can be a tough subject in relationships, especially if you fall under financial hardship. This has the potential to put a strain on your relationship with your co-borrower.
How To Apply for a Joint Personal Loan
Joint personal loans are offered by many banks, credit unions and online lenders. Most online applications are quick and easy, and can be completed in just a few steps. So let’s take a look at how you can apply for a joint personal loan.
Begin by checking your credit scores – it can help you focus on joint loans you’re more likely to qualify for. You’ll also need to know exactly how much money you want to apply for.
When researching lenders, you’ll get a better picture of what you need to qualify. And you may find that online lenders are less strict in their eligibility requirements.
Above all, remember that both borrowers must qualify for the loan to receive funding.
Make sure that both you and your potential co-borrower are researching loan options together, to see which is best for both of you. Compare multiple lenders and if you have questions, reach out to the lender before you start the application process.
Make sure you compare:
- Loan requirements (such as credit scores or income)
- Interest rates (you may be able to choose between a fixed rate or a variable rate)
- Repayment terms
- Potential fees (such as origination fees, late fees or prepayment fees)
It might also be a good idea to check out a lender’s customer service support. Having access to lender resources and support can come in handy if you face issues during repayment.
Some lenders offer the ability to get prequalified for the joint personal loan you want to apply for. Getting prequalified helps speed up the process since the lender already knows a bit about you before you apply.
You’ll submit minor details like both of your incomes, your housing situations, how much you want to borrow and what you want to use the loan for. Just make sure to indicate that you’re applying for a joint loan, so the lender can gather both of your information.
There’s only a soft credit inquiry during the prequalification process – so you don’t have to worry about it affecting your credit scores until you actually apply for the loan.
Gathering all the information you need before you start the loan application can help speed up the process – even more so if you’re already prequalified.
Some of the information you may need includes:
- Photo ID
- Social Security Number
- Proof of address
- Proof of income and employment information
- Financial information (like bank statements)
Submit your application
Just like the prequalification process, you’ll need to indicate the loan you’re applying for is a joint loan, so you and your co-borrower’s information are processed.
Remember, a hard credit inquiry is done when you apply for a loan. This means there could be a temporary dip in your credit score. And because both you and your co-borrower are applying for the loan, this effect will happen to both of your credit scores.
Check to make sure all of the information you’re submitting is correct, as errors can cause delays in the loan approval process. Once you’re satisfied with the application, submit it and wait. Most lenders have online applications, which means you could receive loan approval in as little as a few minutes to a few days.
Once approved, you and your co-borrower will sign the loan agreement and decide, with the lender, how you’ll set up your monthly payments.
Is a Joint Personal Loan Right for You?
Applying for a joint personal loan can be a great way for co-borrowers to fund a larger expense or purchase. But it’s a commitment that requires financial responsibility from both borrowers.
Have a clear plan of how much money you need, your repayment strategy and what you plan to do if your relationship sours – because you both are ultimately responsible for repaying the loan no matter what happens.
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The Short Version
- A joint personal loan is a personal loan that has two or more borrowers
- Lenders will decide to give you a joint personal loan by looking at both borrowers’ credit scores, credit history, income and debts
- You don’t have to be married to get a joint personal loan, but some lenders may require you to live at the same address