Will I get a better deal if I take out a Joint Loan?


When you first start thinking about borrowing money; whether it is a mortgage, a credit agreement or a personal loan, it can be difficult know which of the many various loan options you should go for. You want to get the best deal, but also one that suits your personal requirements and in some instances a joint loan could be the ideal solution to this.

What are Joint Loans?

As the name would suggest, joint loans are loans that are taken out between two or more people. joint loanIn most cases the loan agreement is made between couples or business partners and it can have many advantages for all parties involved. Lenders will take into account the combined income and credit history of all borrowers, which means you are more likely to qualify for a larger loan and better credit. There are various different types of loan that can be taken out jointly, but the most common include: Secured Loans, for example a mortgage, and Unsecured Loans, such as a personal loan from a bank, building society or other financial institution.

As with all financial products, joint loans come with their pros and cons, so let’s firstly take a look at the reasons why taking out a joint loan is a good idea.

Advantages of a Joint Loan

Help with payments

When you take out a loan by yourself, you are solely responsible for making repayments, but when you take a loan out with someone else, particularly if it is a business partner, the onus of repayments is divided between you. Not only that, but with two borrowers comes two incomes, so straight away the pressure to meet repayments should be substantially eased.

Higher loan amounts

lots of moneyLoan companies like to know that they can trust whom they lend their money to and part of that is having the confidence that repayments will be made. When an application for a joint loan is made, the loan company will take into account factors such as the income, credit history, relationship of borrowers and employment status etc. of both borrowers. In general, the income of two people is more likely to be higher than that of one and therefore the loan company will be happier lending a greater amount.

Low income?

If someone is on a relatively low income they are less likely to be accepted for a loan if they were to apply by themselves. However, if they joined forces with someone on a higher income than themselves and who also had a good credit history, they are much more likely to be accepted for a joint loan. Lenders view low income individuals as too risky, because there is more chance they won’t meet repayments. Adding a second borrower into the mix offers the lender extra security and also increase the likelihood of better interest rates.

Bigger purchases

Joint loans are a good solution for when money is required for larger purchases, in particular the purchase of property. Joint loans/mortgages are very common and it is a great way to pull resources together in order to obtain a higher loan amount.

Disadvantages of a Joint Loan

Reading through the list of advantages above, a joint loan seems almost too good to be true, but they’re certainly not for everyone and it is advisable to know the down sides as well.

Joint Responsibility

joint responsibilityJoint loans do indeed mean joint responsibility for repaying back the loan amount. In most cases this isn’t a problem, but what if the following should occur?

  • Spouse, partner or business associate passes away.
  • Personal or business relationship breaks down.

Any joint loan you have between you will still be there and will still need repaying. If the other borrower decides not to make repayments, unless you cough up the money yourself, you run the risk of getting into financial debt, damaging your credit history and in turn will be unlikely to be accepted for credit in future. Lenders aren’t interested in your personal affairs, they simply want their money back by the agreed time and if it’s not, penalties will be issued.

Joint Credit

From the moment you take out a joint loan with someone else your credit file will be linked to theirs. This means, should that person run into bad credit in the future, it could damage your own credit rating. Before applying for a joint loan with anyone you should always insist that you both take a full credit history check to ensure there are no skeletons lurking in the closet.

joint loanBefore applying for any loan always do your research. Firstly, check out one of the comparison sites, such as moneysupermarket or gocompare for a list of deals that best suit you. Speak to the loan company and don’t be afraid to ask as many question as you like until you’re certain of exactly what you’re getting. You may also want to speak to an independent financial adviser, who will offer you an unbiased opinion and be able to advise you on the best financial product for you.

And finally, make sure you really know the person who you are considering taking out a joint loan with and ask yourself:

  • Do I need a joint loan?
  • Can I trust my co-borrower?
  • Is it in both our best interests?
  • What amount to borrow?
  • What are the repayment terms?
  • Could I afford to make repayments on my own if it ever came to that?



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