Some people prefer to take out a joint personal loan rather than as individuals, but there are benefits and risks you need to be aware of when doing so. This is a brief guide on what a joint personal loan is and the pros and cons of taking one out.
What is a joint application personal loan?
A joint personal loan is a loan you take out with another person. In many cases, this person is a spouse, partner, friend or sibling. This person is known as the co-borrower. The co-borrowers in a joint personal loan are equally liable for the debt, meaning each is responsible if the other is incapable of meeting repayments.
Why take out a joint application personal loan?
There are a number of reasons, including:
- You might be interested in sharing an asset with a close friend or loved one, for example a boat
- You may be keen to secure a larger loan than the one available to you on your own
- You are unable to meet the loan requirements set out for individuals
But before making a decision, we recommend you consider some of the following points:
- You both need to meet the loan criteria
- You will both be equally responsible for the repayments
- Disagreements over money can quickly come between firm friends and/or family members
It’s a good idea to closely assess the person with which you’re applying for the loan. Are they reliable, or do they have a history of poor finances and reckless spending? Are they selfish with money? If they’re a partner, are you likely to still be with this person over the life of the loan? Canstar doesn’t generally dish out relationship advice, but it might not be a good idea to take out a personal loan with a girlfriend or boyfriend you’ve just met!
How to apply
Applying for a joint loan can be just as easy as applying for a regular loan. You simply need to provide your personal and financial details, which the lender will assess as one application instead of two.
Should I consider a joint personal loan?
- You might want to share an asset, like a car. If you’re buying a car with your partner and need a personal loan, a joint application could make more sense than just one of you applying.
- If you want a big sum, you may be eligible for a larger loan if you apply with a partner, as the lender will look at the financial situation of you both.
- Maybe you want to consolidate large debts. If you and your partner have a large amount of debt separately, you could potentially save money by applying for a joint, debt consolidation personal loan. Read more about debt consolidation in our story, Should you get a personal loan for debt consolidation?
- You could be a parent wanting to help out your child.
Whatever your reason for applying for a joint loan, always consider your own financial situation, that of your co-applicant, and whether together you can comfortably manage the loan repayments.
What can go wrong with a joint application personal loan?
Getting a loan with another person is a major responsibility and, unfortunately, not everyone takes that responsibility seriously. If your co-borrower runs out of money, vanishes or just straight up refuses to continue their repayments, you will be stuck with the bill. Remember: the lender only needs to chase up one person, not two. The financial obligation you agreed to will need to be met, and a failure to do so can result in legal action.
A final summary: pros and cons of joint application personal loans
The table below shows a basic overview of the advantages and disadvantages that come with taking out a joint application personal loan.
|Pros and cons of joint application personal loans|
|Potential greater chance of approval||You have to rely on the other person’s repayments|
|You can be approved for a larger loan||You can be liable for the whole payment if the other person fails to make their repayments|
|You can consolidate larger debts||The lender can pursue one person for legal action if it isn’t repaid|
If you’ve balanced all the factors and decided you’re ready and willing to take out a joint application personal loan, then you can compare what’s available with Canstar:
Sign up to receive more insights like this straight to your inbox.
Enjoy reading this article?
Sign up to receive more news like this straight to your inbox.