Applying for a personal loan as part of a joint application can help you increase your eligibility for a personal loan, especially if you’re looking to score a good interest rate or a larger loan amount. It’s also a way for you and your partner to assume equal financial responsibility for a large purchase. Just make sure you know how they work before you agree to borrow.
4 ways joint application personal loans are different
Although applying jointly is similar to applying individually, there are a few things to consider before you start your application.
If you are approved, you assume equal responsibility for the loan with the person with whom you are applying. This means if either one of you becomes unable to repay their part of the debt, the other is still responsible for the repayments.
Both applicants need to meet the criteria for the personal loan.
You may be eligible for a higher loan amount by submitting a joint personal loan application. However, it is important not to take on more of a loan than you need or can afford, even if you are approved.
Joint personal loans are a serious responsibility. Consider the relationship you have with the person you’re applying with and their financial situation. Is their job stable? What is the state of their credit history? Are they likely to default? These are the things you need to think about when taking on the responsibility of a loan.
What are the benefits of applying with another person?
These loans are an option for several reasons, and they provide a variety of benefits. Here are some of the features:
Increase your chances of approval. If you are on a lower income, self-employed or just want to bolster your application, a joint personal loan can be a way to do it. The details of both applicants are considered by the lender.
Share an asset. If you are planning to share the asset, such as buying a car with your partner, a joint application could make more sense than just one of you applying . Consider your own personal situation to decide what works best for you.
Be eligible for a larger loan. You may be eligible for a larger loan if you apply with a partner. As you both agree to manage the repayments, the lender considers the income and financial situation of both applicants when deciding how much money to lend.
Consolidate large debts. If you and your partner have a large amount of debt separately, you can both save by applying for a joint, debt consolidation personal loan. Split the monthly repayments according to how much debt you contributed to the loan and benefit from the reduced interest and fees.
How to apply for a joint personal loan
You and the person you are applying with need to provide personal, employment and financial details as part of the application. This may be done in one application or separate sections. The lender considers the application details as a whole, while considering both your eligibilities for the loan.
Before you apply for a loan, consider who you are entering into an agreement with; both yours and their ability to manage the loan, and whether you’re taking on the right loan for the both of you.
Lenders will evaluate the eligibility of both applicants. Your approval will depend on how heavily the lender considers credit scores in its underwriting formula. You can also explore bad credit personal loans for alternative options.
Joint applicants are equally responsible for the payments, and whatever is purchased with the loan is considered owned by both borrowers. A cosigner, on the other hand, is only responsible for the loan if the main borrower defaults.
There are a few ways to do this, but one common option is to refinance the loan under the other borrower. This transfers the debt to a different lender and allows the agreed upon person to be solely liable for the balance.
Elizabeth Barry is Finder's global fintech editor. She has written about finance for over five years and has been featured in a range of publications and media including Seven News, the ABC, Mamamia, Dynamic Business and Financy. Elizabeth has a Bachelor of Communications and a Master of Creative Writing from the University of Technology Sydney. In 2017, she received the Highly Commended award for Best New Journalist at The Lizzies. Elizabeth has found writing about innovations in financial services to be her passion (which has surprised no one more than herself).
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