What's in our guide to Joint Loans?
- What is a joint account loan?
- Benefits of a taking out a joint account loan
- Risks of appling for a joint loan
- What to consider when applying for a joint loan
- Top joint loans available right now:
- Alternatives to taking out a a joint loan
A joint loan combines two incomes and credit reports, meaning borrowers can often boost their chances of getting accepted, borrow more and share the repayments. You can apply for a joint loan with your partner, friends or family.
Benefits of a taking out a joint account loan
- Combined credit scores: When two people apply for a loan a lender will consider both credit files, which boosts your chances of getting approved. Partnering with someone who has a better credit score may also help improve yours in the long term if you repay on time.
- Boost your income: Combining two incomes gives you a better chance of meeting affordability requirements, helping to get a better rate and borrow larger amounts if needed.
- Share the repayments: The responsibility of repaying a joint loan is shared so you can combine your incomes to ensure it is repaid rather than having to do it alone.
Risks of applying for a joint loan
- Joint liability: Regardless of who the money is for or how it is spent, the debt always has to be repaid in full. This can cause an issue if you get divorced or fall out with someone you borrowed with.
- Credit report risk: A joint loan links your credit file with the other person. If the loan falls into arrears both reports and scores will be affected, which could harm any future applications.
What to consider when applying for a joint loan
The rate and term are important, as is any flexibility to take a payment holiday or repay early.
Joint loans add extra complexity as both parties need to be in for the long haul. Whether you are borrowing as husband and wife, partners or just friends, it may be worth drawing up a legal agreement to decide how the loan is repaid if you separate.
Top joint loans available right now:
You can access standard personal loan rates through a joint application. The sweet spot for the best rates is between £7,500 and £15,000:
- Admiral: offers an APR of 3.4% to borrow from £5,000 to £7,000.
- Cahoot: currently offers the lowest rate on the market at 2.8% APR for loans between £7,500 and £20,000 for one to five years.
- TSB: Borrowers can get a loan of up to £25,000 for between one and seven years at 2.9% APR from TSB.
Alternatives to taking out a joint loan
- Credit card: A credit card may be an effective way of accessing smaller amounts, especially if you can find one offering interest-free spending. Don’t forget to make the monthly repayments or you will be charged interest.
- Remortgage: Mortgage rates are at record lows and you could use the equity in your property to release extra cash. This will increase your mortgage repayments and put your home at risk if you fall into arrears.
Savings: If you are not in a rush and have an idea of how much you need, why not put a certain amount aside each month if you can afford to do so? That will save on interest and you could even put it in a savings account in the meantime.
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Marc Shoffman is a freelance journalist specialising in personal finance. His work has featured in Financial Times’ publications as well as The Times and Mail on Sunday.