What are Joint Personal Loans?

Key Takeaways

A joint personal loan is different from having a guarantor or a co-signer, in that the joint borrower has access to loan funds.
You might have a better chance of being approved for a joint personal loan – and perhaps even score a lower interest rate – but there are also risks to consider.
The process of applying for a joint personal loan is similar to other loans.

Sharing a financial product with another person is not uncommon – just think of a joint bank account or mortgage. Personal loans are no different, and many banks allow you to take out one of these loans with another party, known as a joint personal loan.

Taking out a joint personal loan is a bit different from having a co-signer or guarantor, and it comes with its own benefits and drawbacks. Read on to learn more about joint personal loans and whether they might be a good choice for you.

Personal loans are a great borrowing option for many different situations, whether that be covering an emergency expense, financing a large purchase like home renovations or consolidating debt. This is because personal loans are typically unsecured – meaning they don’t require collateral – and have fixed interest rates and repayment terms.

A joint personal loan is just a subtype of personal loan.

“A joint personal loan means there are two parties on the loan,” says Laura Sterling, vice president of marketing at Georgia’s Own Credit Union. “Other parties are considered co-borrowers, giving them shared access to the money borrowed and equal responsibility for paying back the loan.”

It’s important to note that there are several different situations in which you might have more than one person participating in a personal loan, and the implications for access to funds and repayment responsibility vary.

In all cases, it’s important that the primary borrower (or borrowers) on the loan are able to make their payments on time. If not, both their own credit scores and those of any guarantors or co-signers could be negatively impacted.

Pros and Cons of Joint Personal Loans

Perhaps you and your spouse are taking out a loan to finance a home improvement purchase. Or maybe a friend or family member is helping to pay for an emergency expense via a personal loan. Regardless, there are many situations in which a joint personal loan is a good choice. Still, it’s important to make sure you only take out a joint personal loan with another party you trust, as you will both be responsible for paying back what you owe.

Pros

You have a better chance of qualifying. “A co-borrower (i.e. taking out a joint loan) can be very helpful when applying for a personal loan if that co-applicant has very good credit, and the main applicant does not,” says Enright. “Lenders may offer a rate discount in these cases.”
You share the cost of the loan. A co-borrower can help with the repayment, thus reducing one sole person’s responsibility for the loan.

Cons

You might have to pay back the entire loan. You’re still responsible for paying back the entirety of the loan, even if your joint borrower stops paying.
Your credit is at risk. If you miss payments for any reason, both borrowers’ credit will take a hit.
You might lose a relationship. “Keep in mind, joint loans that go bad can not only lead to damaged credit for both borrowers, but can also lead to damaged relationships,” says Sterling.

Both Enright and Sterling recommend having a clear conversation with your co-borrower before applying for a loan, including making a plan for who is responsible for payments and how the funds will be distributed.

How to Get a Joint Personal Loan

Applying for a joint personal loan is similar to applying for any other personal loan. You’ll just need to make sure the lender offers the option to add a co-borrower when researching your borrowing options.

To apply for a joint personal loan, follow these steps:

Do your research. Not every lender offers joint personal loans, so be sure to check before you apply. It also helps to verify beforehand whether they offer the loan amount you desire, as well as rates, terms and conditions.
Check your eligibility. Many lenders list minimum requirements, so be sure that both you and the person you’re applying with meet the qualifications.
Prequalify. Many lenders offer prequalification, so as not to take a hard hit to your credit until you’re ready to commit. Take advantage of this to shop around for the best terms. Be sure to consider not only the interest rate, but the minimum and maximum loan amounts, how long you’ll have to pay it back, what type of fees you’ll pay, and any usage restrictions.
Apply for the loan. Both you and your co-borrower will be required to submit personal and financial information, as well as undergo a hard credit check. Once approved, you’ll both need to sign the loan agreement.

“It is best to do your research, compare rates and check your eligibility requirements before applying for any type of loan. If you have an existing relationship with a financial institution, start there,” says Sterling. “You are more likely to qualify for a loan with a lender who you have history with.”

What Are the Current Personal Loan Rates?

The average personal loan rate is 11.56% as of January 3, 2024, according to a Bankrate survey. Personal loan interest rates are trending higher over the past six months, increasing by about half-a-point since July 2023:

Personal loan rates vary widely based on creditworthiness. Borrowers with very good or excellent credit scores will see much lower interest rates than those with fair or poor credit. Often, borrowers with bad credit will apply for a secured personal loan that uses an asset as collateral in order to achieve lower rates:

Bankrate Averages

Minimum FICO Credit Score: 680

Minimum FICO Credit Score: Not disclosed

Minimum FICO Credit Score: 300

Key Takeaways