What Is a Joint Loan?
A joint loan gives co-borrowers equal access to the loan and shared responsibility for paying it back.
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A joint loan is a loan you take out with another person, known as a co-borrower. You and the co-borrower share ownership of the loan and responsibility for repayment.
Mortgages and auto loans are commonly joint loans, but you can also get a joint personal loan.
Joint personal loans are a good option for borrowers whose credit scores or incomes are too low to qualify. Adding a co-borrower with stronger credit or income may also get you better terms, such as a lower annual percentage rate or higher loan amount.
How does a joint loan work?
A joint loan has at least two borrowers who are equally responsible for repaying the debt. When you apply for a joint personal loan, the lender considers each co-borrower’s credit history and debt-to-income ratio. If approved, each borrower is listed on loan documents and has access to loan funds.
Joint loans are similar to co-signed loans, which can also increase your chances of qualifying for a personal loan if you have bad credit, insufficient income or high debt levels.
The difference is that co-signers don’t receive loan funds and are only liable for payments if the primary borrower defaults on the loan. With a joint loan, both borrowers have access to loan funds and both are responsible for repayment.
Co-borrower | Co-signer | |
|---|---|---|
Responsible for paying back the loan? | Yes, each co-borrower is equally responsible for repayment. | Only if the primary borrower defaults. |
Access to loan funds? | Yes. | No. |
Do payments impact credit score? | Yes. | Yes. |
For example, if you and a co-borrower are approved for a $50,000 joint personal loan, you both have access to the funds and are responsible for the monthly payment. On the other hand, your co-signer would pick up monthly payments for this loan only if you fail to repay.
Qualifying for a joint personal loan
You can get a joint personal loan from some online lenders, banks or credit unions (if both parties are members). Here are the steps to obtain a joint loan:
Check eligibility requirements. Pay close attention to the lender’s credit score and debt-to-income ratio requirements. Lenders consider the income and credit histories of both you and your co-borrower. For example, LendingClub requires each borrower to have at least a 600 credit score and a DTI below 40%.
Pre-qualify with multiple lenders. You and your co-borrower can pre-qualify — check your estimated rate before committing to a loan — with many online lenders, banks and credit unions. Pre-qualifying does not affect your credit score.
Compare lenders. Assess the annual percentage rate (APRs), repayment terms and potential fees, including origination and late fees, associated with each joint loan offer.
Apply for the loan. Once you select the best offer, you and your co-borrower will fill out and submit the loan application. Lenders may ask for documentation to verify personal and financial information. Upon approval, you'll both sign the loan agreement.
Lenders that offer joint loans
Lender | Minimum credit score | APR | Loan amount |
|---|---|---|---|
600 | 7.90% - 35.99%. | $1,000 - $40,000. | |
None. | 7.99% - 35.99%. | $1,000 - $50,000. | |
None. | 18.00% - 35.99%. | $1,500 - $20,000. | |
660. | 8.99% - 35.99%. | $2,000 - $50,000. | |
None. | 8.99% - 29.99%. | $5,000 - $100,000. |
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How do joint loans affect your credit score?
Once you submit an application, the lender will do a hard credit check, which will temporarily lower your credit scores.
A joint loan will also show up on your and your co-borrower’s credit reports. All loan activity — like on-time or missed payments — can impact your credit scores.
For example, on-time payments can help you build credit if the lender reports to the three major credit bureaus (Equifax, Experian and TransUnion). On the other hand, missed payments by you or your co-borrower can hurt each of your credit scores.
» MORE: Get your free credit score
Pros and cons of joint loans
Pros
Increase your chance of qualifying. Borrowers with high debt-to-income ratios or low credit scores may improve their chances of qualifying by applying with a co-borrower with higher income and stronger credit.
Potential for better loan terms. You may also qualify for a higher loan amount and lower rate.
Share the cost of repaying. You don’t have to shoulder the cost of a personal loan alone since the co-borrower is equally responsible for repayment.
Cons
You could be on the hook for the entire loan. If the co-borrower fails to pay their share, then you’re responsible for the entire loan.
Your credit depends on your co-borrower’s diligence. Because you both equally own the loan, if either of you misses a payment, the other person’s credit can take a hit.
Could lead to a damaged relationship. If either person fails to pay and negatively impacts the other, it could lead to a strained relationship.
When to consider a joint personal loan
A joint loan may be the right choice if:
You cannot qualify for a loan by yourself because your income or credit score is too low to meet lenders’ requirements.
Adding a co-borrower allows you to get a lower rate or larger loan.
You’re using the loan to consolidate debt you’re jointly responsible for, or for a shared expense (like a renovation project for a home you both own).
On the other hand, if you can qualify for a loan with monthly payments that comfortably fit into your budget, you may not need a joint loan.
Before you sign your names on a loan contract, make sure you and your co-borrower are on the same page about what share of the monthly payment you’ll each be responsible for, as well as how you’ll make payments. Consider putting the agreement in writing.
Because you’re both equally responsible for the debt, it’s also important to plan for worst-case scenarios. If you couldn’t afford to make the full payment on your own, you may want to avoid a joint loan.
Joint personal loan alternatives
If you’re thinking about a joint personal loan, here are a few alternatives to consider:
Co-signed personal loan: When you take out a personal loan with a co-signer, you’re responsible for payments and you have exclusive access to loan funds, but your co-signer agrees to be responsible if you don’t make payments. A co-signer with good credit can help you qualify for a loan with better terms, but you’ll hurt their credit if you miss payments.
Secured personal loan: Taking out a secured loan, which is backed by collateral, may be an option if you can’t qualify for a traditional personal loan. However, your lender can seize your collateral if you don’t make payments, so you’re putting your property at risk.
Personal loan for bad credit: It’s possible to get a personal loan with bad credit even if you don’t have a co-borrower or co-signer, but you’ll pay higher interest rates. Traditional banks often require at least good credit to take out a personal loan, but some credit unions and online lenders have more flexible standards.
0% APR credit card: If you have a good credit score (typically 690 or higher), you may qualify for a temporary 0% APR on balance transfers, new purchases, or both. Some banks and credit unions offer joint credit cards, where both users share usage of the card and are jointly liable for payments.
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