How to Get a Joint Personal Loan

A joint personal loan enables two co-borrowers to submit a single loan application. A lender considers the credit and income histories of both co-applicants, such as a married couple or a parent and child. If they’re approved, the co-borrowers share the loan proceeds as well as the responsibility for paying off the loan.

How to Get a Joint Personal Loan

A joint personal loan is a personal loan taken out by two people, who are both responsible for repayment. It provides a lump sum of money that is repaid in installments with interest. The interest is typically at a fixed rate. 

Getting a joint personal loan is fairly straightforward and the process is similar to applying for a personal loan with one borrower. Here are six steps for getting a joint personal loan.

1. Identify the applicants: Decide who will be applying for the loan. If you and your joint applicant are related, you are more likely to be approved for a loan than if you’re not related. Lenders tend to prefer joint applicants who share a home or family history because they view joint applicants with a strong family connection as being less risky than other joint applicants.
2. Determine the loan’s purpose: Both co-borrowers should agree on how to spend the money, whether it is for consolidating debt incurred by one or both borrowers, funding a home improvement project, or another purpose. After all, both parties will be responsible for paying back the loan.
3. Review your credit: Before filling out a joint application for a personal loan, you and your co-borrower should review your individual credit reports. Reviewing your credit report will give you a better sense of whether now is a good time to apply for a joint loan or if it is better to wait until one or both co-borrowers improve their credit score. Borrowers with poor credit tend to face higher interest rates or be denied loans.
4. Go over your income: If you and your co-borrower have good incomes, a lender will likely look at your application more favorably than if one of you has unreliable income. However, if one of you has been laid off, unemployment benefits may count as income.
5. Compare your options: Once you’ve decided to get a joint personal loan, you can shop around for a lender. As you’re researching banks, credit unions, and other lenders, compare interest rates and other lending terms as well as each financial institution’s customer service reviews and overall reputation.
6. Submit your application: You can apply online or in person at a bank or credit union branch. Either way, be prepared to supply personal information about each co-borrower and provide any required documents.

When Is It a Good Idea to Get a Joint Personal Loan?

If you and your co-borrower need a lump sum of money and you have a plan for repaying the loan, then a joint personal loan may be a good idea.

When you have positive credit reports with a history of on-time payments, you have a better chance of being approved for a joint personal loan. Higher credit scores typically lead to lower interest rates, saving you money in the long run.

In many cases, the proceeds of a joint personal loan can benefit each co-borrower. For example, a joint personal loan taken out by you and your spouse can be used for renovating your kitchen.

When Not to Get a Joint Personal Loan

If you have strong credit but your potential co-borrower does not, then you might not want to submit a joint application. A co-borrower’s poor credit history might trigger a higher interest rate or other unfavorable lending terms, or even cause an application to be rejected. In this case, it might be better to submit separate applications for personal loans or delay applying.

Finally, you might want to avoid getting a joint personal loan if it will strain your budget or if one of you may lose their source of income.

What You Need to Get a Joint Personal Loan

What you need to get a joint personal loan is essentially the same as what you need to get an individual personal loan. The only difference is that a joint personal loan will require you to supply more information and documents.

Here’s what you need to get a joint personal loan:

• Personal information: Lenders will request Social Security numbers, birthdates, phone numbers, email addresses, and residential addresses for both applicants.
• Employment and income information: You’ll both need to provide employment status, employers’ names, sources of income, and monthly income amounts.
• Loan information: The lender typically will ask about the purpose of the loan, how much money you want to borrow, and the length of term you want. Typical personal loan terms are from one to five years.
• Documents: A lender might request documents like pay stubs, W-2s, tax returns, utility bills, and copies of driver’s licenses or Social Security cards.

Choosing a Joint Personal Loan

Choosing a joint personal loan involves weighing several factors:

• Existing relationship: If you already have an account or loan with a lender, you might qualify for a lower annual percentage rate (APR) or other benefits if you take out a joint loan with that lender. Some lenders require that you have an account with them for at least one year before you apply for a personal loan.
• Interest rates: Look for the lowest interest rate with the best lending terms. Generally, APRs for personal loans range from about 6% to 36%, but rates regularly go up and down. Even a small difference in interest rates can save you substantial money in the long run.
• Fees: Fees can include a loan origination fee, a late payment fee, or a fee for paying the loan off early. They can add to the total cost of a loan. Ideally, you should choose a lender that doesn’t charge any personal loan fees.
• Customer service: If your friends, relatives, or colleagues have used the lender, learn what they say about the lender’s customer service. Read online reviews about what customers have experienced dealing with the company.
• Reputation: You can learn about a company’s reputation through customer reviews, which you can find online. You can search the company on the Better Business Bureau or Trustpilot websites for a better understanding of its reputation. 

Compare Personal Loans

Alternatives to Joint Personal Loans

Alternatives to joint personal loans include:

• Credit cards: A credit card might be a good alternative for funds you need, especially if you already have one. However, credit cards have much higher interest rates than personal loans. They are generally more ideal for everyday spending. One way to use a credit card for longer-term expenses is to get a 0% introductory rate credit card that does not charge interest for several months. If you can pay the balance before the introductory term ends, you can pay for larger expenses with no interest.
• Personal lines of credit: A personal line of credit is similar to a credit card. You borrow money as you need it rather than in one lump sum, and you pay interest only when you tap into the funds. Once you repay the principal, you can borrow it again.
• Home equity loans: A home equity loan lets you borrow money against the equity in your home. Your home serves as collateral for the loan, and you receive the proceeds in one lump sum.
• Home equity lines of credit (HELOCs): A HELOC allows you to use your home equity to regularly borrow money over a certain period of time, as long as you don’t exceed the credit limit. It works in much the same way as a credit card in that you can use funds as needed and you can borrow the money again after you repay it.
• Cash-out refinancing: This type of mortgage enables you to convert some of your home equity into a lump sum of cash. A cash-out refinance loan replaces your existing mortgage.