Are you finding it hard to get a loan by yourself? How about applying for a joint loan? Discover with Cashfloat all you need to know about joint loans and why they may be the right choice for you.
What Are Joint Loans?
Joint loans are loans that are made to two or more borrowers – usually couples or business partners. This is advantageous to both parties – those taking out the loan and the one lending the money. This is because when you have more than one borrower, there is more income. Because of the combined income and credit scores, it also makes it easier for borrowers to qualify for a larger loan. When you take a joint loan, you enjoy better credit and more collateral to help boost your qualifications.
Key Points About Joint Loans
- Joint loans can increase your chances of being approved for a loan.
- Joint loans can be easier to pay back since there are two of you responsible for the repayments.
- If your partnership or marriage dissolves during the loan term, you are still responsible for repaying the loan.
- The types of loans you can take out jointly include: mortgage loans (categorised as a secured loan), no guarantor loans (a bank or personal loan), or a joint bank account where there is an overdraft facility.
How Does a Joint Loan Work?
A joint money loan entails combining the annual incomes or totals of the monthly paychecks of the two people borrowing the money. When you bring your spouse or partner into the picture, the lender will consider all information you present. The lender will examine it thoroughly to determine the loan’s probability. They will check both your background and your partner’s. Mainly they will verify your personal income, employment status, credit history and your respective residential statuses.
What Types of Loan Can Be Taken out Jointly?
- Secured Loans – such as a mortgage
- Joint account which allow you to go into an arranged overdraft
- Unsecured loans – borrow from Banks and alternative lenders
Can I Get a Joint Loan from Cashfloat?
As a small loans lender, Cashfloat do not offer joint loans online. Most payday loans lenders do not offer joint loans because the process is usually strictly online. Banks and high street lenders are most likely to offer joint loans, and you can meet them in person, so it makes the joint loan process much easier.
What Are the Benefits of a Joint Loan?
Joint loans certainly offer a lot of benefits. Aside from having a helping hand when it comes to paying off the debt, your credit standing and qualifications will look better because it is augmented by those of your partner. Here are the four main benefits of joint loans.
If you have a history of bad credit, instead of applying for bad credit payday loans, team up with someone who has a better credit score. Using a joint loan application becomes your best chance to secure funds from a reputable financial institution. You just need to make sure that the partner you are applying for a loan with has a good credit standing because the credit rating is the biggest factor that determines whether you will qualify for a loan or not. It also directly affects the interest rate of your joint loan.
A joint loan is also beneficial for individuals with low income. This is because lenders will question your ability to repay, thus your chances of your lender rejecting your loan application are high. But you can team up with someone who has a high income or has more assets than you. This helps the lender feel a greater sense of security that you will be able to repay the money borrowed. This then increases your chances of being allowed to borrow money at interest rates that are reasonable.
Additionally, joint loans are ideal for when you are borrowing the money for a major purchase, such as a home. Combining resources makes it easier to qualify for a property purchase, and it is beneficial if you cannot afford to purchase a home by yourself, whether it is because your income is not enough, or if you have credit issues. The same applies to those who want to own a bigger, upgraded home.
Paying off the debt is easier because you share the burden with someone else. Of course, the setup depends on you and your partner, such as the amount of money each of you will pay. But ideally, paying off the debt should be more comfortable for both of you, since there are two of you taking care of it.
Who is Responsible for a Joint Loan?
The general idea for a joint loan is that two people combine their credit scores and income to qualify for a loan. Therefore, because two people took out the loan, both of them will be responsible for paying off the loan. This is the ideal scenario. However, before you consider taking a joint loan, you must consider this scenario. In the event that one of you becomes unable to pay your share, the other takes on the loan in its entirety. In short, there is a possibility that you may be the only one paying off the loan.
Signing a credit agreement or a loan or overdraft with someone else, means that you both agree to pay off the whole debt if the other party cannot, or will not pay for it. The bank or financial institution that lent you the money will not investigate who spent the money. They will also examine who benefitted from the loan, or who owns the item/s purchased with the joint loan. Your relationship does not make a difference either. You can be married, in a civil partnership or in a more or less platonic relationship. As far as the terms of your joint loan are concerned, what matters is that the money you borrowed gets repaid.
Who Can Take out a Joint Loan Together?
It really depends on what kind of loan you need. If you are interested in taking out a mortgage, it is possible for any two people to take a joint mortgage loan together, as long as they intend to own the property together. So, unmarried partners, friends, siblings and business partners can take out mortgages together. It is not unheard of for 4 people to take a joint home loan together.
However, in the case of an arranged overdraft, you must have a joint account in the first place. Check with your lender before applying for a joint loan.
What if the Partnership Dissolves?
If your partner passes away, any joint mortgage will have to be repaid by you. The same applies if you get divorced, get an annulment, separate legally or break up. Additionally, your ex-partner could still run a debt on a joint bank account if there is an overdraft facility. Then they can leave you with the total bill. Keep in mind that most joint bank accounts are set up in a way that one person can spend and withdraw money without having to ask permission from the other person. You can protect yourself by setting up an account that requires both of you to agree before any money can be taken from the account.
A joint loan, may not be for you! It is a shared responsibility that can go very wrong. Apply for an online loan UK with Cashfloat today for an alternative to joint loans.
Can I Get out of a Joint Loan?
It is not very easy to get out of a joint loan – it is not a 50/50 share but a responsibility. However, if you have broken up with your joint loan partner, the best thing to do is contact your lender. They may be willing to change the loan terms, so only one person becomes responsible for the loan. (However, you should make an arrangement with your ex-partner with whom you took out the loan so that you still share the burden of the loan.)
Should I Make a Joint Loan Application?
Joint loans does sound like a good idea when applying for a short term loan. It will also increase your chance of being approved for the loan. When payback time comes, it should be a bit easier as you will both be responsible and “a problem shared is a problem halved”! If your credit score is not looking so good, rather than going for a no credit check loan, team up with someone who has a good credit score. It’s a good idea to discuss with your partner how and when you will pay back the payday-loan UK before you take out the loan. A disadvantage of the joint loan is that if your partner passes away, you could be left with the whole loan to pay back.
In conclusion, while joint debts are more convenient, it also equates to joint responsibility and liability. Make sure that you and your partner trust each other completely before agreeing on a joint loan because if one of you cannot pay up, the other ends up with a sizable debt on their hands – and as partners, you want to avoid this at all costs.
