Joint loans can apply to couples, family members, friends, or colleagues. By applying for a joint loan, you could take out more money than taking a loan out by yourself. However, either borrower could be asked to repay the full debt if the other can’t.
They can include each member as the borrower or a guarantor for the other. They can often be used for weddings, car, home improvement, or debt consolidation.
Joint loans can vary in APR and interest rates, so it is best to research before applying. Each applicant should consider the financial positions of each other and ability to repay the loan every month.
A joint loan, much like a standard loan, can apply to you in many situations. For example, a couple may take out a loan for a mortgage or other large-scale purchases.
Each lender will have their own criteria for lending, so bear this in mind.
If you are a couple, there are some instances where this loan will apply, depending on how you want to use the funds. These can include:
An alternative situation where joint loans will apply to you is if you act as a guarantor for your partner in the loan. Some lenders allow partners or spouses to act as a guarantor for the borrower.
To be a guarantor, you would have to agree to cover any monthly repayments if your partner is unable to do so. This requires you to be financially stable and trust the borrower to make the payments.
You will likely be subject to a credit check if you are interested in becoming a guarantor. A joint loan could potentially make the credit scores of one another stronger. This can be enhanced by meeting your payments on time and in full.
The majority of mainstream loan options may be available to joint applicants.
The options available to you could include guarantor loans, personal loans, payday loans and secured loans. Of those, a personal loan is the most common option through high street banks. It can, however, be difficult to secure if one applicant, or both, have bad credit ratings.
Payday loans provide a quick, short-term finance option, making them popular for applicants. However, they are often accompanied by very high APR. This could lead to large monthly repayments.
Secured loans require an asset, such as your home, to be used as collateral against the loan. However, failure to meet repayments each month may lead to you losing your asset.
Guarantor loans are popular among borrowers with a bad credit history. They require a financial partner to meet any repayments you can’t. Each partner could act as the other’s guarantor in this option.
It is essential to apply for loans that you’re expected to be approved for. Most high street banks will run a hard search on your credit history which could affect your credit score.
Specific joint loans can come with high interest rates, depending on which you choose. However, it could provide both of you with an opportunity to boost your credit scores.
By being financially responsible and meeting monthly payments on time and in full, your credit rating should increase. As you are in a joint loan, your credit files will be linked to one another.
Budgeting is the best way to keep track of your monthly repayments. This extends to avoiding new debt through excessive spending wherever possible. This could damage both of your credit scores through increased owed credit.
If your monthly payments are of concern, speak to your lender as soon as possible.
As your credit scores aren’t fixed, your financial behaviour can define it. Therefore, knowing how and when to repay your loan gives you control over your score.