If you’ve been struggled to secure a loan on your own, have you considered taking out a joint loan with your spouse or partner?
A joint loan can open up more borrowing options with better rates than if you were to apply individually.
This is because, with a joint loan, you have more income between the two of you, which means more collateral for a lender to take into account and can allow you to qualify for a bigger loan, with better deals on credit too.
Joint loans can be a great solution if you have a big payment to make, especially if you’re otherwise struggling to get a loan.
However, there are a couple of important things to bear in mind with a joint loan. Firstly, the payment responsibility is shared, but if for any reason the relationship between the two borrowers was to break down, the full loan is still repayable between you.
In addition, joint loans are an unsecured form of a loan (unlike say, a mortgage, which is a secured loan). What this means is that the money that you’re borrowing isn’t secured against an asset and you’ll enjoy lower interest rates, but it can also be a riskier option.
To find out more about the pros and cons of secured and unsecured borrowing, you can check out our guide to secure and unsecured loans.
Joint loans are a great way to get a loan if one of you has bad credit, as it takes into account both of your incomes.
Having a second applicant means that you can act as each other’s guarantors, which greatly increases your chances of being accepted, even if your own credit score isn’t the best.
Of course, if both of you have a bad credit score, then your chances of being accepted are lower, so ensure that between you, you can safely afford to pay back any loan that you might be accepted for.
To learn more about how guarantor loans work and how they could be a way to secure a loan even if you have a bad credit rating, read our post on what a guarantor loan is.
There are many situations where a joint loan might be beneficial to you, especially if you’re making a large payment such as buying a house or car for example, or when you need to consolidate debts.
Some common scenarios where people look to take out joint loans include:
Alternatively, you might be acting as the guarantor in the loan if your partner has a poor credit rating, in which case you will be agreeing to cover any monthly repayments if the other person is unable to do so.
Of course, if this is the case, then you’ll need to ensure that you’re financially stable and that you’re confident that the borrower will be able to keep up their payments.
If you’re approach to be a guarantor in a joint loan, you’ll probably have to undergo a credit check, but doing so could enhance both of your credit scores in the future if you pay off the loan on time and in full.
There are many reasons why applying for a joint guarantor loan may be a better option for you than applying for one individually:
A joint loan means that you’ll have the income of two people to draw on, rather than one. Income is one of the most important things a lender will look at when deciding whether to approve a loan, and if the monthly payments are going to be too high compared to what you earn, you’re likely to be declined, so the more income you can show, the better. For this reason, adding another borrower to the loan can be very beneficial.
If your own credit rating isn’t ideal, adding an additional borrower who has a good credit history can boost your chances of approval.
Additionally, another borrow can bring extra assets such as cash for a deposit or collateral to help secure the loan.
Another great benefit of taking out a joint loan is that you can have the money in your account very quickly, sometimes as soon as the very same day, which is vital if you’ve got an urgent payment to make.
Fixed Interest Rates
Joint loans also have fixed interest rates, which means that they won’t change for the duration of the loan, even if interest rates such as the Bank of England’s base rate are to change. This means that no matter what, you won’t see a change in your monthly repayments, so you’ll be able to plan and make sure that you can make them.
Choose Your Loan Term
Finally, you’re able to choose your loan term, between one and five years, giving you greater flexibility and ensuring that you agree upon a loan that works for you and your finances.
However, there are also some important things that you need to remember before committing to a joint loan.
Remember that when you enter into a joint loan, you’re not just responsible for your ‘half’ of the loan, that’s not how it works!
You’re essentially both agreeing to pay off the full debt if the other can’t and it doesn’t matter who spent the money!
This is still the case if you’re married and you split up, or even if one of you were to die, so if for whatever reason the other person doesn’t pay up, you could find yourself in trouble/
Failure to Repay
You should always make sure that you’re in a comfortable position to repay a joint loan before taking one out, as there can be repercussions if you fall behind.
Firstly, this will obviously have a negative impact on both of your credit scores (even if you’re nt the one failing to make the payments) and could also lead to CCJs or insolvency.
So, if you think that you could benefit from a joint loan and perhaps have struggled to get a loan on your own and have someone who you would trust to be your guarantor, why not consider applying for a joint loan with Guarantor Loans.