What you need to know about joint loans

What you need to know about joint loans

If you’d like to borrow money alongside someone close to you, a joint loan could be the answer. Perhaps you’re struggling to get approved on your own and you’d like to strengthen your application by including two people’s incomes. Otherwise, you might want to take out a joint mortgage with someone else. This involves adding another person onto the agreement to go ahead with the loan.

Whether you’re raising funds for a renovation project or you’re planning to buy a house, entering a loan together means you may be able to borrow more than if you were applying for one yourself. This is because there’s more income and collateral between the parties involved.

We offer joint loans to UK homeowners – if this is you, we can help you raise funds that will make a difference. Keep reading to learn about the shared financial responsibility involved and find out how we can help.

What is a joint loan?

A joint loan involves borrowing money where more than one person is responsible for paying it back. Like individual loans, they usually involve repaying the money over a set period and with interest.

Examples of credit that can be taken out jointly include secured and unsecured loans. The first involves using a valuable asset such as your home as security or collateral, while the second doesn’t need security. You can also jointly open a bank account with an overdraft.

Can you get a joint loan?

To be granted a joint loan, the lender will assess everyone’s credit records. This is why it’s important to improve your credit score where you can before you apply.

Depending on the circumstances, you may be more likely to be accepted as there’s at least one other person to fall back on if someone’s score is lower. The lender is trying to establish how likely it is that they will receive timely repayments.

How do joint loans work?

Joint loans allow you to raise the funds with one or more other people, therefore sharing the responsibility of repaying any debt.

Who is liable for joint debt?

If you sign a contract for a joint loan, this means you’ll both agree to pay the full amount if the other can’t or refuses to pay. This is known as ‘joint and several liability’.

Even if you weren’t the primary spender or you don’t own the assets bought using the money from the loan, you’ll still be responsible for the full loan amount and need to abide by the agreement. This can cause complications if someone passes away or if the relationship breaks down.

You will be responsible for paying off the loan (e.g. a mortgage) even when others in the agreement can’t or won’t. This is why it’s crucial to understand what you are signing up for and whether you can afford to borrow in the first place. You may want to seek financial or independent legal advice before you commit.

Can I get a joint loan with my partner?

Many partners decide to take out a joint loan if they want to share the financial responsibility for something. Note that joint loans are separate to guarantor loans, which involve a third party agreeing to pay back the loan if the borrower can’t.

Why do people get joint loans?

There are several reasons why people apply for joint loans.

Firstly, two or more people may want joint financial responsibility for a particular asset or set of costs. Joint loans may allow you to qualify for a larger loan, which is why they’re often used for larger purchases. Many people take out joint loans for large home improvement projects, for example. A joint mortgage also works similarly to a joint loan, where the financial responsibility is shared.

Joint loans can also help with debt consolidation. By joining forces for a debt consolidation loan, you can pay off debts or reduce monthly payments as a unit rather than individually.

Considerations with joint loans

One of the main advantages of secured loans is that you’re more likely to be approved even if you have a bad or non-existent credit history. This is because the asset you offer as security, most commonly your home or another property you own, guarantees the loan and reduces the risk for lenders compared to unsecured personal loans.

Ongoing commitment

Agreeing to take out a joint loan requires ongoing commitment. Like when taking out an independent loan, you should assess whether you can afford it. Remember, you can seek professional financial advice before making any decisions if you’re unsure.

Once you’ve entered a loan agreement, you can’t withdraw or remove parties unless someone pays the amount in full.

Free debt advice is available from organisations such as National Debtline, Citizens Advice and StepChange.

Joint responsibility

It’s important to remember that any missed payments will affect everyone’s credit scores. A lower credit score can be limiting when borrowing money 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.

Having 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. Similarly, create a contingency plan in case one borrower can’t meet payments.

Choosing someone you trust

You should never agree to take out a loan with someone you don’t trust or who is pressuring you. Financial abuse can seriously hinder your financial autonomy and livelihood. Make sure you know the signs and seek help if needed.

Remember, if one borrower stops paying, the other parties are responsible for repaying the full amount.

How to apply for a joint loan

When applying for a joint loan, you’ll typically be asked for personal details such as your name, address history, income and expenditure. Sometimes, you can receive the funds in as little as three to four days if your application is successful and all parties have signed their documents. This may take longer in more complex cases.

Can I apply for a joint loan online?

This will depend on the type of joint loan you’re applying for and the lender involved. Often, you can apply directly to the provider online, over the phone or in person, provided you can give them the relevant information.

Can I get a joint loan if I have a lower credit score?

When you apply for a loan of any type, the lender will always perform a credit check. This is done to assess the risk involved when lending credit. It’s used so the lender can determine how likely they think you are to pay the money back based on your credit history. If you have a higher credit score, you may be able to borrow more and access better credit deals.

The lender will look at all parties’ credit records so someone else’s score may boost the application. In the eyes of the lender, there is likely to be greater security, as more than one person is on hand to repay any debt.

What happens to joint loans in a divorce?

When a couple gets divorced, their matrimonial assets (acquired during the marriage) are split across both parties. This includes any joint debts.

If a debt in one partner’s name is proven to be a matrimonial debt, this will mean that both parties are responsible for repaying even though there’s only one name assigned to it.

Even debts acquired before the marriage can be considered matrimonial debt unless they are proven to be separate from the rest of the shared finances. In this case, the court will consider it to be non-matrimonial debt and it won’t need to be repaid jointly.

The court will not be able to change who is responsible for certain debts or modify the name linked to that debt. If you need help arranging your financial matters during a divorce, it may be sensible to seek legal advice so everything is properly handled.

What happens if you own a house together?

When or if the house is sold, the mortgage is the first debt to be paid back. This is followed by the secured loan, which is paid back with the remaining funds. This is why a secured loan is officially called a ‘second charge mortgage’ or a ‘homeowner loan’.

Apply for a joint loan with Evolution Money

If you want to apply for a joint loan, you can do so with Evolution Money today. We offer secured homeowner loans from £5,000 up to £100,000. Check your eligibility to get started.

Not only are we regulated by the Financial Conduct Authority but we’re also members of the Finance & Leasing Association, so you can enjoy added peace of mind. Our customers’ reviews showcase exactly why we’re rated ‘Excellent’ on feefo – we’ve been awarded the platform’s Platinum Trusted Service Award too.