Written by A joint personal loan is a personal loan that is taken out by two people, known as co-borrowers, who are both equally responsible for paying it off. Other than this, a joint personal loan is a standard loan product, where you receive a lump sum of money to be repaid in regular instalments. These are typical characteristics of a personal loan:
- Unsecured or secured: personal loans can be secured – meaning you put up a valuable asset like a car as security – or unsecured, meaning you borrow money without putting up any collateral.
- Loan amount: get approved for however much you can afford from as little as $2,000 all the way up to $75,000 for an unsecured loan, and more for a secured loan.
- Loan term: loan terms are available from one to seven years, giving you and your co-borrower flexibility to select a loan length that accommodates your repayment needs.
- Interest and fees: on top of your loan amount, you will have to pay interest as well as potential fees such as monthly account fees and late payment fees.
- No deposit: 100% financing is available so you won’t need to make a deposit to take out a personal loan.
Before applying, it’s important to ensure that both you and your co-borrower meet the lender’s eligibility requirements. That's where Savvy can help you out. We'll compare the best available options from our partnered panel
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Why choose a joint personal loan?
There are a number of reasons to opt for a joint personal loan if you need to borrow money:
- Increase your likelihood of a successful application: too many cooks don’t spoil the broth with joint loans, with one or more extra borrowers potentially raising your chances of having your application approved.
- Borrow more funds: bigger projects can be facilitated by an extra person jumping into the application, as the potential added security for the lender could see them sign off on higher loan amounts.
- Smaller repayments: by splitting each repayment with your co-borrower, your contribution to the personal loan each month is halved compared to the same loan taken out on your own.
- Build your credit scores together: when you and your co-borrower make repayments, you’ll each be gradually improving your credit score, potentially putting you in a better position to borrow in the future.
- Consolidate debt: one of the most common uses for a personal loan is to consolidate outstanding debts. Shared debts are no exception and can help you tackle them together.
However, before applying for a loan with someone else, there are some potential drawbacks to keep in mind:
- Reliance on your co-borrower: it is a heavy responsibility to charge someone with fulfilling a loan, so make sure your co-borrower is reliable and able to help you share the weight of the joint loan.
- Potential credit damage: if your co-borrower is unable to consistently pay their share on time, your credit score will sustain the same damage as theirs.
The types of Personal Loans
Personal loan repayment calculator
It’s important to have an idea of what different loans might cost you overall before you apply. Fortunately, Savvy’s personal loan repayment calculator is simple to use and tells you everything you need to know about how much different offers might add up to overall based on a variety of different factors.
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Personal loan eligibility and documentation
How do I compare joint loans?
Secured and unsecured
You’ll have the choice between opting for a secured or unsecured loan, meaning that you can either attach an asset as collateral to secure the loan or avoid doing so. Interest rates are generally lower with secured loans and lenders may be more willing to accept your application even if your credit score isn’t perfect.
However, unsecured loans are easier to obtain in general and can be processed more quickly.
Interest rates
Another key consideration for borrowers is their loan’s interest rate. This is the most substantial contributor to the cost of your personal loan, which is why it’s so important to secure as low a rate as you can.
They’re simple to compare, as each lender’s rate is advertised prominently on their site and ours. Whilst it shouldn’t be the sole point of comparison between loans, it should be prioritised.
Type of interest
You may also have the option to choose between a fixed or variable interest rate for your joint loan. Fixed rate joint loans maintain the same interest rate throughout the life of the loan, as opposed to variable rate joint loans which can change depending on the ebbs and flows of the market.
Fixed interest is better for budgeting, which can be useful when it comes to co-ordinating your shared commitments, while variable interest can allow you to take advantage of lower rates during your term if they fall.
Fees
Additionally, fees can set you back quite a bit if you choose a loan that charges them at a high rate. While some lenders don’t charge fees on their loans, others do, which can fall between the following costs:
- Establishment fee: $0 to $595
- Ongoing fees: $0 to $10 per month
- Early repayment fee $0 to $600+ (depending on time left on loan)
- Late payment fee: $15 to $35
Loan terms
You should ensure that your preferred loan term is also offered by your lender, as it’s crucial that your finance is affordable for you. Some lenders won’t offer loans shorter than two or three years, for instance, while others cap their terms at five.
Always assess whether your preferred lenders are offering the length of loan that you’re looking for before committing to one over the others.
Other frequently asked questions about joint loans
Depending on the nature of the loan and your agreement with your partner, you may have to. If one borrower disappears from the picture, the lender will pursue the other, who would still be legally liable for the whole debt. Ultimately, you’re responsible for the loan if your name is attached as a borrower, regardless of the circumstances that may play out over the course of its repayments.
Joint applications are assessed on the strength of the applicant in the weaker financial position. This means that, even if you have a decent credit score and comfortable finances, you’re likely to only be approved for an amount that your co-borrower is eligible to take on. In this case, a bad credit borrower can likely only apply for an amount up to around $12,000 at a high interest rate, which is what your joint application will fall within.
While you can technically apply for a loan with anyone, a co-borrower should be someone that you know, trust and can rely upon to fulfil their half of the deal. Furthermore, lenders may be less likely to approve a personal loan application between two people without a familial or close personal relationship. Some lenders may even impose additional requirements, such as requiring you to be married or partnered, or to live at the same address.
Technically, both co-borrowers owe 100% of the loan. For example, if you enter a $30,000 joint loan with a co-borrower, both borrowers owe $30,000. The lender will only seek out what it has lent, though, so there is no need to pay that amount for each borrower. The lender will likely only chase up one of the borrowers for loan repayments at any given time rather than both, but whether it chooses to alternate between co-borrowers will vary between lenders. Make sure you have a clear repayment arrangement with your co-borrower.
Your comparison rate is a percentage that incorporates both your interest rate and primary fees, such as establishment and monthly costs. This is designed to give you a more accurate indication of the cost of your loan overall, as an interest rate on its own isn’t wholly representative of this.
A joint personal loan is taken out by two individuals who are both equally responsible for repaying the loan from the start. In contrast, with a guarantor personal loan, a third party agrees to take responsibility for and repay the loan if the borrower defaults, adding an extra layer of security for the lender.
