What you need to know about joint loans
A joint loan lets you borrow money with another person. This could be a partner, family member or friend. You may consider choosing a joint loan if you want to borrow more than you could on your own or share the cost of something large. You might take out a joint loan to pay for home improvements or to buy a property, for example.
In this guide, we’ll explain everything you need to know about joint loans, including:
- What a joint loan is
- How do joint loans work
- Who is responsible for repayments
- How to apply for a joint loan
- The risks and things to consider
Taking out a secured loan is a big decision that may have a major impact on your finances. If you need more guidance, visit our Help & Advice page or get in touch with the Evolution Money team.
What is a joint loan?
A joint loan is a type of loan taken out by two or more people. Everyone named on the agreement is responsible for repaying the loan.
Like any loan, you will:
- Borrow a set amount
- Pay interest on top
- Repay it over an agreed period
Joint loans can be secured or unsecured. The first involves using a valuable asset such as your home as security, while the second doesn’t need security. You can also have joint financial products like bank accounts with overdrafts.
Am I eligible for a joint loan?
Eligibility depends on your circumstances.
When you apply, the lender will check:
- Your income
- Your outgoings
- Your credit history
They will assess every person named on the application. As with any loan, you are more likely to be approved if you have a good credit score. You are also more likely to be offered favourable interest rates.
In some cases, applying jointly may improve your chances of being approved. This is because there is more than one income and multiple people are responsible for repayments.
However, if one applicant has a poor credit score, it could affect the whole application.
How do joint loans work?
Understanding how joint loans work is key before applying.
Joint loans generally work like this:
- Two or more people apply together
- The lender assesses all applicants
- If approved, you receive the funds together
- You share responsibility for repayments
Each person is equally responsible for the full debt. This applies even if one person earns more or if one person uses more of the money. This is known as ‘joint and several liability’
Under these terms:
- If one person stops paying, the other must cover the full amount
- The lender can pursue any borrower for the total debt
Because of this, trust is very important when taking out a joint loan.
Who is responsible for joint debt?
Everyone named on the loan agreement is fully responsible. Even if you didn’t spend the money or no longer have a relationship with the other borrower(s), you are still legally required to repay the loan.
This could become complicated if a relationship breaks down or one borrower cannot afford the repayments.
Before agreeing to a joint loan, make sure you understand the risks. You may also want to seek independent financial or legal advice.
Can I get a joint loan with my partner?
Yes, many couples choose to take out joint loans. This may be for home improvements, large purchases or mortgages. A joint loan allows both partners to share the cost and responsibility.
It’s important not to confuse joint loans with guarantor loans. A guarantor loan involves a third party who agrees to step in if payments are missed. With a joint loan, both borrowers are equally and fully responsible from the start.
Why do people get joint loans?
There are several reasons why people might choose joint loans:
- Borrow a larger sum of money: Combining incomes may allow you to access a larger loan amount.
- Fund large purchases: Joint loans are often used for things like home improvements or buying a property.
- Debt consolidation: In some cases, people use joint loans to combine their existing debts into one monthly payment.
Things to consider before getting a joint loan
Joint loans may be useful, but they also come with risks. Before applying for a joint loan, think about:
- Ongoing commitment: You are committing to the loan for the full term. You cannot remove someone from the agreement unless the loan is repaid or refinanced. Free debt advice is available from organisations such as National Debtline, Citizens Advice and StepChange.
- Joint responsibility: Missed payments will affect everyone’s credit score. This could make it harder to borrow in the future. Make sure you take out a joint loan with someone you can rely on and who will commit to this joint responsibility.
- Make a plan: To limit any risks, consider discussing how you’ll manage the loan together. This means outlining any repayment responsibilities so they’re clear from the start. You may want to create a contingency plan in case one borrower can’t meet payments.
- Choose someone you trust: Never agree to take out a loan with someone you don’t trust or who is pressuring you. Financial abuse may seriously hinder your financial autonomy and livelihood. Make sure you know the signs of financial abuse and seek help if needed.
If you’re taking out a joint loan to consolidate your existing debt, it’s also important to think about the risks. You should be certain that taking out a joint loan will benefit all borrowers. In some cases, a debt consolidation loan may actually be more expensive. Consider getting legal advice if you’re not sure. You may also want to read our blog for more guidance: Is Debt Consolidation a Good Idea?
How to apply for a joint loan
Here’s how it typically works:
- Check your eligibility: Make sure you meet the lender’s basic criteria. For example, some lenders only offer loans to homeowners.
- Decide how much to borrow: Work out how much you need and what you can afford to repay each month.
- Gather your details: You will need to provide name and address history, income details, and monthly expenses for all applicants.
- Submit your application: You can usually apply online or over the phone.
- Credit checks and assessments: The lender will review all applicants’ credit files and financial situations.
- Receive a decision: If approved, you’ll be offered loan terms. This includes fees, interest rate, monthly repayments and total repayable amount.
- Sign the agreement: All parties must agree and sign before the funds are released.
- Receive the funds: In some cases, you could receive the money within a few days. The exact length of time may vary from lender to lender.
To start a joint loan application with Evolution Money, simply check your eligibility here.
Can I get a joint loan with bad credit?
It may still be possible to get a joint loan with a bad credit score. However, it depends on the lender and their criteria.
When you apply, lenders will check all applicants’ credit histories and assess the overall risk. If one applicant has a stronger credit profile, it may help balance the application. However, poor credit could still affect the outcome.
If you have bad credit, improving your credit score before applying may increase your chances of approval.
What happens to joint loans in a divorce?
In a divorce, joint debts are usually considered alongside shared assets. Both parties may still be responsible for repayments. The lender agreement does not change automatically.
Even if a court decides how debts should be split, the original loan agreement still applies. The lender can still pursue either borrower for payment.
If you’re going through a divorce, it might be worth seeking legal advice. This may help you understand your options and make sure your finances are properly handled.
Consider a joint loan with Evolution Money
If you’re thinking about applying for a joint loan, Evolution Money may be able to help. We offer secured homeowner loans from £5,000 to £105,000, with flexible terms to suit your needs.
Check your eligibility online today.
All loans are subject to status and eligibility. Available to UK homeowners aged 21 to 70. Terms and conditions apply. Not all applicants will be accepted.
Don’t rush into securing a loan against your home. Falling behind on repayments may put your property at risk of repossession.
Representative 17.46% APRC (Variable)
For a typical loan of £23,120 over 120 months with a variable interest rate of 17.46% per annum, your monthly repayments would be £442.07. This includes a Product Fee of £2,312.00 (10% of the loan amount) and a Lending Fee* of £763.00, bringing the total repayable amount to £53,047.80. Annual Interest Rates range between 8.6% to 27.87% (variable). Maximum 50.00% APRC. *Lending Fee varies by country: England & Wales £763, Scotland £1,051, Northern Ireland: £1,736.
Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
