Joint loans with friends, partners or family members can make it easier to access larger loan amounts than applying alone. However, it also comes with certain risks.
For example, if both you and your co-borrower have poor credit scores and fall behind on payments or default on the loan, it could affect both of your scores. Furthermore, even if both of you end the relationship and go separate ways, any debt incurred during that time will still appear on both of your names on credit reports.
Share an asset
If you need to finance a home improvement project or upgrade your car with minimal upfront expense, joint unsecured loans are the way to go. While there may be some drawbacks to consider, the rewards can be substantial. Not only will a cosigned loan provide you with a lower interest rate, but you could potentially qualify for other loans with favorable terms and conditions such as a no fee credit card or home equity line of credit if your credit score is good to excellent. Sharing a loan with your spouse, partner, sibling or significant other is an excellent way to build bonds over a shared interest in home improvement projects or new purchases. Selecting an experienced lender with a reliable track record for responsible lending decisions is essential in getting the most out of your home or car loan.
Access a larger loan amount
Joint unsecured loans offer you the chance to access larger loan amounts than you might be able to secure on your own. They’re offered from various lenders, such as banks and credit unions.
When applying for a joint loan, the lender will assess both your credit history and income to determine if you’re suitable. This could result in receiving more money than you would receive on your own and at an advantageous interest rate.
Joint loans can be an excellent way to consolidate debt, purchase an asset or finance home improvements. But before you commit, be sure you understand both the advantages and potential drawbacks of joint borrowing.
Utilizing a cosigner is another viable option. A cosigner assumes the responsibility for a loan without ownership, yet they still must repay it if the primary borrower misses or defaults on payments.
Share responsibility for repayments
If you need money for an important purchase, a joint unsecured loan is an effective way to share the cost with someone you rely on – whether that be your partner, relative, or close friend.
Joint loans require both you and the other borrower to be responsible for paying back the debt, no matter what happens. This could put a strain on your relationship if one of you misses a payment or fails to adhere to terms set out in the loan agreement.
Joint loans can be a gateway to someone else’s credit history, which could limit your future loan eligibility and put further drops in your own score if either party defaults on the loan. So make sure you do your due diligence before agreeing on such an arrangement. Having a plan for how you will repay any debt should your relationship end or you decide not to continue with repayment altogether is also key.
Link to someone else’s credit history
If you and your partner are considering taking out a loan, joint unsecured loans could be the perfect solution. Whether buying a house, paying for wedding expenses or consolidating debt, applying jointly could offer better rates and terms than applying alone.
When applying for a joint personal loan, lenders will check both of your credit reports and scores to make sure both of you meet the qualifications. They may also take into account incomes and debt-to-income ratios to determine if together you’re eligible for financing.
If either you or your co-borrower falls behind on payments, both of your credit scores may suffer. On the contrary, if you make on-time repayments each month, both of your scores can improve.