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A Guide To Joint Personal Loans

6-Minute Read
Published on April 27, 2023
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Have you tried to apply for a personal loan but couldn't get access to a large enough amount for your needs? Do you have bad credit and can't qualify for a personal loan at all? If you know someone with better credit that you absolutely trust, joint personal loans may be right for you.

Joint personal loans can be a great way to access capital you couldn't have on your own, but they come with some risks. Missing payments could not only risk your financial well-being, but it could also damage a close relationship.

What Is A Joint Loan?

A joint loan allows two co-borrowers equal access to borrowed funds that they are equally responsible for paying back. Borrowers often use them when they cannot qualify for a large enough loan on their own or have a low credit score and cannot qualify for a loan at all. The co-borrowers of a joint loan are often spouses or close family members. It can be risky to co-borrow money with someone you don't have a strong personal relationship with or don't absolutely trust.

How Do Joint Personal Loans Work?

A joint personal loan is similar to a standard personal loan with a co-signer, but they differ in a few critical ways. The primary borrower retains full ownership of the funds for personal loans with a co-signer. The co-signer receives no ownership and is only responsible for paying the loan if the primary borrower does not. With a joint personal loan, both co-borrowers have equal ownership over the loan and are equally responsible for paying it back. Both co-borrowers' names will appear on all loan documents.

When you and your co-borrower apply for a joint personal loan, a lender will consider both of your credit scores, debt-to-income ratios (DTIs), whether your income is consistent and possibly an array of other personal financial details.

Why Consider A Joint Personal Loan?

There are many types of personal loans that may fit your specific needs. Follow along to see if personal loans for joint applicants are the right option for you.  

  • Getting approved for a larger loan: Joint loans may be an excellent option for a borrower who can’t qualify for the amount they need. Having two borrowers responsible for paying off the loan – and at least one with a higher credit score – is less risky for lenders, making them more willing to provide a larger loan.
  • Helping the borrower with a weaker history: If a spouse, family member or close friend has a less than stellar credit history, you can help them build their credit score back up through a joint personal loan. Your good credit history will make it more likely for them to qualify for the loan, while their consistent payments on the loan will bring their score up.
  • Shared responsibility: If you want to build up your credit, having a trusted partner to help with the repayment costs can keep you from missing payments that bring your score back down.
  • Equal access: It's never fun when your co-borrower stops making payments on the loan, but there is a bright side. If you make up your partner's payments, you will still have full access to the funds. This is a significant advantage over co-signing a loan, which would force you to cover the payments without having any access to the funds.

Qualifying For Joint Personal Loans

Qualification standards for joint personal loans can vary significantly based on the co-borrowers credit history and debt-to-income ratios. Most lenders require a minimum credit score of 640 – 650 for both co-borrowers. However, if one borrower has an excellent credit history, some lenders may allow one of the borrowers to have a credit score as low as 580-600.

Aside from credit scores, lenders consider both borrowers' current income and debt-to-income ratios (DTI). Both borrowers having a steady income will improve their chances of qualifying. Still, the lenders must confirm that the borrowers will not spend too much of their income paying off all of their debts. You can calculate your DTI by dividing your monthly debt payments by your monthly income. So if you pay $2,000 monthly on debt payments and your monthly income is $5,000, your DTI is 40%. Lenders generally prefer your DTI to be below 36% to qualify for a joint personal loan. Like your credit score, lenders will consider the income and debts of both applicants equally.

Disadvantages Of Applying For A Joint Personal Loan

Joint personal loans come with some financial and personal risks, such as: 

  • The weaker borrower can threaten loan approval: If your co-borrower has an especially bad credit history, lenders may not approve you for a joint personal loan, no matter how good your credit score is.
  • Both credit scores are at risk: Co-borrowers involved in the transaction will have hard credit checks during the application process, negatively affecting your credit scores temporarily even if you never miss a payment. If either borrower does miss a payment and the other cannot provide the remaining funds, both borrowers' credit scores will take a hit. Remember that this can happen even if you pay your portion of the payments.
  • Relationships may be damaged: Stressful financial situations caused by missed loan payments can strain even the best relationships. That's why it’s essential to only apply for a joint personal loan with someone you absolutely trust, like a spouse or other family member.

How To Get A Joint Personal Loan

The research and application process for getting a joint personal loan is essentially the same as the one for getting a personal loan, but with a co-applicant. Here are the steps:

  1. Find your co-borrower. You should only co-borrow a joint personal loan with someone you trust entirely, such as your spouse or close family member. We can't say it enough!
  2. Prepare your finances. Check your credit score and review your financial situation to confirm how much you’re comfortable paying monthly for the loan.
  3. Shop lenders. Some lenders specialize in working with borrowers with low credit scores but may give you higher interest rates, while others will provide you with better rates but have higher qualification standards. Research multiple lenders' qualification standards to determine how many match your financial situation and needs.
  4. Apply for the loan. Once you've found lenders that meet your needs, it's time to apply. Keep in mind that you can apply for joint personal loans from multiple lenders to see a wide range of what you qualify for.

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Joint Loan FAQs

Is a co-applicant the same as a co-borrower?

Yes. The two words typically describe the same person at different points in the loan process. When applying for a joint loan, lenders may refer to you as a co-applicant. Once the lender releases the funds to you and the person you are borrowing with, the lender may refer to you as co-borrowers.

Can an unmarried couple get a personal loan together?

Yes. Lenders do not require co-borrowers on personal loans to be married. However, if one of the co-borrowers fails to make their portion of the payments, you could be responsible for paying back the entire loan on your own. That's why it's best to get a joint personal loan with a co-borrower who can keep their promise and whom you trust completely.

Is it better to apply for a loan as a couple?

While you’re not required to be married to your co-borrower to get a joint personal loan, married couples may be more likely to qualify. Lenders may view married couples as more likely to stay together than other borrowers with looser connections, making them less risky to lend to.

Does a joint loan affect my credit score?

Yes. Since both co-borrowers are responsible for paying back a joint loan, failing to make the necessary payments will harm your credit score. A hard credit check may also temporarily affect your credit score during the application process. On the other hand, consistently making payments on time will improve your credit score.

The Bottom Line: Only Consider A Joint Personal Loan With Someone You Trust

Joint personal loans can be great for co-borrowers who trust each other to make the necessary payments. If you never miss a payment, you could have equal access to an amount of money that possibly neither of you could access alone. Paying consistently could help borrowers with spotty credit histories build back their credit scores and begin their journey back to financial stability. However, if either borrower misses a payment, it could hurt both credit scores. That's why it’s essential to only apply for a joint personal loan with someone you absolutely trust. If you and a co-borrower are ready to apply, visit our friends at Rocket LoansSM today!

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Patrick Russo

Patrick is a writer and researcher with expertise in real estate and insurance. When he is not writing, you can find him hanging out with his family and friends or walking around Washington, DC, listening to an audiobook.