How to Get a Joint Personal Loan

Joint loans give co-borrowers equal access to funds with equal responsibility to pay them back.

Reviewed by Cierra MurryReviewed by Cierra Murry

A joint personal loan enables two co-borrowers to submit a single loan application. A lender considers the credit and income histories of both co-applicants, such as a married couple or a parent and child. If they’re approved, the co-borrowers share the loan proceeds as well as the responsibility for paying off the loan.

Key Takeaways

• A lender reviews the credit and income histories of both applicants for a joint personal loan.
• Co-borrowers may get a lower interest rate and be able to borrow more money than if they applied individually.
• A lender may charge a higher interest rate for a joint personal loan or approve a lower loan amount if a co-borrower has a lower credit score. 
• A lender can reject a loan application based on one borrower’s finances.
• Depending on the lender, the maximum amount that co-applicants can borrow with a joint personal loan is about $100,000.

How to Get a Joint Personal Loan

A joint personal loan is a personal loan taken out by two people who are both responsible for repayment. It provides a lump sum of money that is repaid in installments with interest. The interest is typically at a fixed rate. 

Getting a joint personal loan is fairly straightforward, and the process is similar to applying for a personal loan with one borrower. Here are six steps for getting a joint personal loan.

Note

A joint personal loan is different from a personal loan with a cosigner in that both borrowers own the loan. With a cosigner, one party assumes responsibility for repayment but does not collect the loan funds.

1. Identify the applicants: Decide who will be applying for the loan. If you and your joint applicant are related, you are more likely to be approved for a loan than if you’re not related. Lenders tend to prefer joint applicants who share a home or family history because they view joint applicants with a strong family connection as less risky than other joint applicants.
2. Determine the loan’s purpose: Both co-borrowers should agree on how to spend the money, whether to consolidate debt incurred by one or both borrowers, fund a home improvement project, or for another purpose. After all, both parties will be responsible for paying back the loan.
3. Review your credit: Before filling out a joint application for a personal loan, you and your co-borrower should review your individual credit reports. Reviewing your credit report will give you a better sense of whether now is a good time to apply for a joint loan or if it is better to wait until one or both co-borrowers improve their credit score. Borrowers with poor credit tend to face higher interest rates or be denied loans.
4. Go over your income: If you and your co-borrower have good incomes, a lender will likely look at your application more favorably than if one of you has unreliable income. However, if one of you has been laid off, unemployment benefits may count as income.
5. Compare your options: Once you’ve decided to get a joint personal loan, you can shop around for a lender. As you’re researching banks, credit unions, and other lenders, compare interest rates and other lending terms, as well as each financial institution’s customer service reviews and overall reputation.
6. Submit your application: You can apply online or in person at a bank or credit union branch. Either way, be prepared to supply personal information about each co-borrower and provide any required documents.

Note

Other sources of income for loan applications can include Social Security benefits, veterans’ benefits, and child support payments.

Joint Personal Loan Lenders

When Is It a Good Idea to Get a Joint Personal Loan?

If you and your co-borrower need a lump sum of money and you have a plan for repaying the loan, then a joint personal loan may be a good idea.

When you have positive credit reports with a history of on-time payments, you have a better chance of being approved for a joint personal loan. Higher credit scores typically lead to lower interest rates, saving you money in the long run.

In many cases, the proceeds of a joint personal loan can benefit each co-borrower. For example, a joint personal loan taken that you take out with your spouse can be used for renovating your kitchen.

If you’re considering a joint personal loan with a co-borrower, make sure you’re both comfortable with being responsible for monthly loan payments.

When Not to Get a Joint Personal Loan

If you have strong credit but your potential co-borrower does not, then you might not want to submit a joint application. A co-borrower’s poor credit history might trigger a higher interest rate or other unfavorable lending terms or even cause an application to be rejected. In this case, it might be better to submit separate applications for personal loans or delay applying.

Finally, you might want to avoid getting a joint personal loan if it will strain your budget or if one of you may lose their source of income.

What You Need to Get a Joint Personal Loan

What you need to get a joint personal loan is essentially the same as what you need to get an individual personal loan. The only difference is that a joint personal loan will require you to supply more information and documents.

Here’s what you need to get a joint personal loan:

• Personal information: Lenders will request Social Security numbers, birthdates, phone numbers, email addresses, and residential addresses for both applicants.
• Employment and income information: You’ll both need to provide employment status, employers’ names, sources of income, and monthly income amounts.
• Loan information: The lender typically will ask about the purpose of the loan, how much money you want to borrow, and the length of term you want. Typical personal loan terms are from one to five years.
• Documents: A lender might request documents like pay stubs, W-2s, tax returns, utility bills, and copies of driver’s licenses or Social Security cards.

Choosing a Joint Personal Loan

Choosing a joint personal loan involves weighing several factors:

• Existing relationship: If you already have an account or loan with a lender, you might qualify for a lower annual percentage rate (APR) or other benefits if you take out a joint loan with that lender. Some lenders require you to have an account with them for at least one year before applying for a personal loan.
• Interest rates: Look for the lowest interest rate with the best lending terms. Generally, APRs for personal loans range from about 6% to 36%, but rates regularly go up and down. Even a small difference in interest rates can save you substantial money in the long run.
• Fees: Fees can include a loan origination fee, a late payment fee, or a fee for paying the loan off early. They can add to the total cost of a loan. Ideally, you should choose a lender that doesn’t charge any personal loan fees.
• Customer service: If your friends, relatives, or colleagues have used the lender, learn what they say about the lender’s customer service. Read online reviews about what customers have experienced dealing with the company.
• Reputation: You can learn about a company’s reputation through customer reviews, which you can find online. You can search the company on the Better Business Bureau or Trustpilot websites to better understand its reputation. 

Alternatives to Joint Personal Loans

Alternatives to joint personal loans include:

• Credit cards: A credit card might be a good alternative for funds you need, especially if you already have one. However, credit cards have much higher interest rates than personal loans. They are generally more ideal for everyday spending. One way to use a credit card for longer-term expenses is to get a 0% introductory rate credit card that does not charge interest for several months. If you can pay the balance before the introductory term ends, you can pay for larger expenses with no interest.
• Personal lines of credit: A personal line of credit is similar to a credit card. You borrow money as needed rather than in one lump sum, and you pay interest only when you tap into the funds. Once you repay the principal, you can borrow it again.
• Home equity loans: A home equity loan lets you borrow money against the equity in your home. Your home serves as collateral for the loan, and you receive the proceeds in one lump sum.
• Home equity lines of credit (HELOCs): A HELOC allows you to use your home equity to regularly borrow money over a certain period of time, as long as you don’t exceed the credit limit. It works in much the same way as a credit card in that you can use funds as needed, and you can borrow the money again after you repay it.
• Cash-out refinancing: This type of mortgage enables you to convert some of your home equity into a lump sum of cash. A cash-out refinance loan replaces your existing mortgage.

Is a Joint Personal Loan Easier to Get?

Applying for a joint personal loan might make it easier to get your application approved, get a lower interest rate, and qualify for more money than an individual personal loan.

What Is the Maximum Amount You Can Borrow With a Joint Personal Loan?

Each financial institution sets its own lending limits. Typically, the maximum amount you might be able to borrow through a joint personal loan is about $40,000 to $50,000, but you may find some personal loans for $100,000.

What Credit Score Do You Need to Get a Joint Personal Loan?

Credit score requirements vary from lender to lender. However, lenders typically look for borrowers with at least a fair credit score of 580 to 669 or a good credit score of 670 to 739.

Can You Get a Joint Personal Loan Without Being Married?

You don’t need to be married to get a joint personal loan. Therefore, an unmarried couple can qualify for a joint personal loan. However, lenders often favor co-borrowers who are related because they view them as lower risk.

What Are the Risks of Getting a Joint Personal Loan?

Risks of getting a joint personal loan include damaged credit scores if the loan is not repaid with timely payments. If one borrower has bad credit, the loan may not be approved. Also, joint personal loans can cause stress within a relationship if, for example, the co-borrowers do not agree on which loan to get or if they struggle to repay the loan. 

The Bottom Line

If you struggle to get a loan, maybe you don’t have much of a credit history or your income is too low, getting a joint borrower can improve your approval odds. The lender will consider both borrowers’ credit and income histories to approve and set loan terms. For this reason, it’s important to choose a joint borrower who has a high credit score or stable income.

Read the original article on Investopedia.