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What Is a Joint Personal Loan and How Does It Work?

What Is a Joint Personal Loan and How Does It Work?
Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman

Updated March 4, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
A joint personal loan is an installment loan for two people. A borrower and co-borrower assume the financial responsibility of repaying the joint personal loan under terms and conditions of a loan agreement. Both of the borrowers may receive a lump sum of money in a shared bank account.Borrowers and co-borrowers can submit an application requesting a joint personal loan. Lenders may check the credit reports and debt-to-income (DTI) ratios of both applicants when deciding whether to approve or deny the joint loan request. Below, we provide more details about joint personal loans and highlight their pros and cons.

What Is a Joint Personal Loan?

A joint personal loan, also known as a joint-applicant loan, is any consumer lending product that provides two borrowers with financing. Lenders may disburse the funds in a joint bank account shared by the borrower and co-borrower, and both borrowers assume the financial responsibility of repaying the loan.Lenders may offer joint personal loans to partners, spouses, or members of the same household. A borrower and co-borrower may apply for a joint loan for any purpose, including auto loan financing, mortgage loan financing, and personal loan financing.

How Do Joint Personal Loans Work?

Joint personal loans work by giving a borrower and co-borrower access to financing. The borrower and co-borrower can submit an application requesting a joint loan. The lender, as mentioned earlier, may check the credit reports and DTI ratios of both applicants when deciding whether to approve or deny the joint loan request.A borrower and co-borrower share the financial responsibility of repaying their joint loan. The lender may charge interest on the outstanding balance of the loan. Any terms and conditions of the joint loan agreement apply to the borrower and co-borrower.

How Is a Joint Personal Loan Different From a Cosigned Loan?

Joint personal loans differ from cosigned loans in several ways. Let’s review their similarities and differences in the table below:

Why Are Joint Personal Loans Used?

A borrower and co-borrower may use a joint personal loan to help cover planned and unplanned expenses, such as medical bills or home improvement projects. A joint personal loan can also be used to help two borrowers get access to financing.If one of the borrowers has good credit, joint personal loans can help prevent subprime borrowers from going solo and applying for a personal loan with bad credit. Both borrowers may apply for the joint loan together using the strength of their combined incomes. This can improve their chances of getting approved for a lump sum of financing.Two borrowers may also use joint personal loans to get better terms and conditions on financing. The borrower and co-borrower may qualify for lower interest rates and larger loan amounts by getting a joint personal loan vs. one of them getting an unsecured personal loan.

Who Is Eligible for Personal Joint Loans? 

Two borrowers who live in the same household may be eligible for a personal joint loan. Lenders may require both borrowers to provide proof of identity, proof of residence, and proof of income.One of the reasons to apply for a personal loan with a co-borrower is to help improve your chances of getting approved for a lump sum of financing that can go toward almost any personal expense. Borrowers, for example, may use personal joint loans to help pay for the costs of home renovation projects.

How Might a Joint Personal Loan Affect My Credit Score?

A joint personal loan can affect your credit score for better or worse depending on whether you or your co-borrower make on-time payments over the life of the loan. Making regular loan payments can build your credit history, and repaying the debt in full may bolster your credit score.Missing payments or defaulting on the joint personal loan can have a severe negative impact on the borrower’s and co-borrower’s credit scores. You may consider refinancing a personal loan if you cannot afford your existing repayment obligations.Lenders may conduct a hard pull inquiry on your credit report if you apply for a joint loan. The inquiry itself may cause your credit score to drop a few points. Borrowers over time can improve their credit scores by paying their bills on time.

Pros and Cons of Choosing a Joint Personal Loan

Joint personal loans have pros and cons. Below we will explore their advantages and disadvantages.

Pros of Joint Personal Loans

Joint personal loans can help you finance large expenses. They can also help you build up your credit history and may offer better terms and conditions than emergency personal loans.

Cons of Joint Personal Loans

Joint personal loans can increase your DTI ratio and make it harder for you to borrow additional money during the life of the loan. Applying for these loans may also cause your credit score to drop a few points if the lender conducts a hard pull inquiry into your credit report.

Alternatives to Joint Personal Loans

Alternatives to joint personal loans may include quick personal loans with no credit check. Consumers can apply for no-credit check loans or payday loans as the sole applicant instead of relying on a co-borrower.Vehicle owners may apply for car title loans as an alternative to joint personal loans. Other alternatives can include credit cards, personal lines of credit, and cosigned loans.

Compare Personal Loan Rates and Apply Today

If you have weak credit and need to borrow money, a co-borrower or cosigner can help you get approved for new financing. Some consumers, however, may not have the ability or desire to get a co-borrower or cosigner in the first place.Lantern by SoFi can help you compare loan rates. Just provide basic information about yourself and the loan you need, and Lantern can guide you in the process to apply for a personal loan with the lender of your choice.
Photo credit: iStock/insta_photosThe tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SoFi Loan Products SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636. For additional product-specific legal and licensing information, see SoFi.com/legal.SOLC112222

About the Author

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman writes about personal loans, auto loans, student loans, and other personal finance topics for Lantern. He’s the recipient of more than 10 journalism awards and currently serves as a New Jersey Society of Professional Journalists board member. An alumnus of the Philadelphia-based Temple University, Abdur-Rahman is a strong advocate of the First Amendment and freedom of speech.
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