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What is a joint loan?

A joint loan is a form of credit that you take out with another person you trust. You may be able to borrow more than you could individually. However, you are both liable for the full amount. So, if the other person stops paying, you will have to cover the full payment – not just your half.

5 min read
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What types of loans can be taken out jointly?

There are different types of joint loans, such as:

  • secured loans – such as a mortgage, where your home is used as collateral
  • unsecured loan – such as a personal loan, doesn’t require any collateral

As an alternative, you could consider taking out a joint bank account with an overdraft facility, if you only need to borrow a small amount.

It’s not possible to take out a joint credit card. Though there may be the option to add a secondary cardholder to your credit card. In this case, the primary cardholder would remain liable for paying the full balance.

Can I get a joint loan? 

Whether you can get a joint loan depends on: 

  • your individual circumstances
  • the other applicant’s circumstances
  • the lender’s eligibility criteria (which varies from one company to the next)

Both you and the other applicant will need to pass certain checks carried out by the lender (such as credit checks and affordability checks). This is because you are both fully liable for the payment of the entire loan - no matter who spends the money. This is known as ‘joint and several liability'.

Read on for 10 tips to improve your eligibility to help you get approved.

How much can you borrow with a joint loan? 

How much you can borrow with a joint loan depends on: 

  • both party’s circumstances
  • the lender’s criteria
  • the type of loan you want to take out

You may find it easier to borrow more money by clubbing together to get a joint loan, as the lender will take both incomes into account. But make sure you only take out what’s affordable to repay.

It’s important that the loan is affordable for you both – now and in the future (e.g. if your circumstances were to change). So, you need to factor this in when you start looking for a loan.

Secured loans

When it comes to the type of loan, you can normally borrow more if you take out a secured loan, compared to an unsecured loan. With a secured loan you can borrow quite a large amount of money – usually £10,000 or more.

This is because, with a secured loan, you use an asset, such as your home, as collateral. So, the lender could sell your asset to claim back owed funds if you fall behind with your repayments (in the worst-case scenario).

Unsecured loans

Unsecured personal loans typically go up to a maximum of £25,000, depending on the lender. They don’t require any collateral, so they’re riskier from the lender’s point of view. As a result, the limits are lower, and the interest rates tend to be higher compared to secured loans.

If you fall behind on your repayments, you don’t have to worry about your home being repossessed. However, missed payments will still affect your credit score - and may impact your ability to get finance in the future.

What can you use a joint loan for? 

You can use a joint loan for anything you like (as long as it’s not illegal or gambling). For example, you could use it for: 

  • debt consolidation
  • home improvements
  • a new car

Lenders don’t tend to stipulate what you can and cannot spend the money on. However, it’s worth thinking about whether you need the money for something important before you borrow. Both you and the other party will need to be able to commit to paying it back.

Getting a joint loan requires a lot of trust in the person you’re applying with because if they stop making repayments, you’ll need to cover the balance yourself. 

Can you get joint loans for bad credit? 

Joint loans for bad credit are available from a wide range of lenders, but you may find your options are more limited in comparison to somebody who has a good credit score – and higher interest rates may apply.

Tip: Use an eligibility checker to see whether you’re likely to get accepted before you apply without leaving a footprint on your credit score.

How does a joint loan affect my credit score? 

How a joint loan affects your credit score depends on you and the other borrower on the loan. If the repayments are always made on time and in full each month, both of your credit scores will be positively affected.

However, missed or late repayments can damage both of your credit histories and can lead to late fees being applied. If the other party stops making repayments, you’ll need to cover the full repayments if you don’t want your credit score to be negatively affected.

When you take out a joint loan your credit report becomes linked to the other borrower’s file. So, any future lenders will be able to see their credit history as well as your own. If they have a good credit history, this might not be an issue and could even work in your favour. But if they have a poor credit history, it could impede your chances of getting accepted now and in the future.

It’s important that you both check your credit reports before you apply together. Avoid making a joint application if one of you has bad credit, as it will reflect badly on the other person.

Can you split a joint loan? 

No, you can’t split a joint loan – even if one person can’t or won’t pay, or you took it out as a couple but have since split up. This is because when you took out the loan you both signed a credit agreement, which is a legally binding contract.

Note, there may be some extraneous circumstances where you can split the loan (such as if you took it out under duress), but you would need evidence to prove this.

Things to remember about joint loans

Before you commit to a joint loan, give these questions some careful thought:

  • Would an individual loan or credit card be a better option for you?
  • Can you afford to keep up with the repayments now and in the future?
  • Can the other party keep up with their repayments and do you trust them to do so?
  • Are you able and willing to make the full repayment costs if needed?
  • Are you happy for your credit file to be linked to the other person’s file?
  • Are there any fees or charges you need to be aware of?

Remember, it’s essential that everyone is confident they can keep up with their repayments before taking out a joint loan. And you trust them to stick to their end of the bargain. Otherwise, you could end up with more debt than you can manage on your hands.

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