What is a joint application personal loan?

Socks, squares of chocolate, days off in a row – some things are better in twos… but can the same be said when taking out a personal loan?

Some people prefer to take out a joint personal loan. There are benefits and risks for you and your co-applicant to consider when doing so.

What is a joint application personal loan?

A joint personal loan is a loan you take out with another person – a spouse, partner, friend or sibling, for example. This person is known as the co-borrower. The co-borrower in a joint personal loan is jointly liable for the debt, meaning that one person will be responsible if the other is incapable of meeting repayments.

Why take out a joint application personal loan?

There are various reasons why a joint application personal loan may appeal to you –  you might be interested in sharing an asset with a close friend or loved one, or you may wish to secure a larger loan. It may also be an appealing option if you are unable to meet the loan requirements set out for individuals.

Before making a decision, here are some things to keep in mind: 

  • You both need to meet the loan criteria
  • You will both be equally responsible for the repayments
  • You may be eligible for a higher loan amount than you would be by yourself

You may also want to think about the person you’re applying with. Are they reliable, or have they had a history of poor finances and reckless spending? If they’re a partner, are you likely to still be with this person over the life of the loan? Depending on your circumstances, there may be many different factors to consider before you commit to a joint personal loan.

If you and a co-applicant are considering applying together, it is important to carefully consider your respective finances first. Many Australians are deferring loans, including personal loans, during the coronavirus pandemic and recession. If a co-borrower defaults on a loan with you, you will still be responsible for making the repayments. If you are unable to pay and default on the personal loan, there may be long-term consequences, such as potential damage to your credit rating.

How can I apply for a joint application personal loan?

Applying for a joint loan is similar to applying for a regular loan. Generally, you will need to both provide your personal and financial details, which the lender will assess as one application instead of two. Checking your credit score – and asking your co-applicant to do the same – may be helpful before you speak to prospective lenders.

What are some pros and cons of joint personal loans?

If you’re considering whether a joint application loan is for you, the table below shows a basic overview of the advantages and disadvantages that come with taking out a joint application personal loan.

Pros and cons of joint application personal loans
Pros Cons
Potential greater chance of approval You have to rely on the other person’s repayments
You may be approved for a larger loan You can be liable for the whole payment if the other person fails to make their repayments
You may be able to consolidate larger debts The lender can pursue one person for legal action if it isn’t repaid

The table below displays some of our referral partners’ unsecured personal loan products for a three-year loan amount of $20,000 in NSW. The products are sorted by Star Rating (highest to lowest) followed by comparison rate (lowest to highest). Use Canstar’s personal loan comparison selector to view a wider range of products on Canstar’s database. Canstar may earn a fee for referrals. Read the Comparison Rate Warning.

What can go wrong with a joint personal loan?

Getting a loan with another person involves sharing financial responsibility. If your co-borrower runs out of money, vanishes or refuses to pay it back, you will be stuck with the bill – including interest. Keep in mind that the lender only needs to chase up one person, not two, and the financial obligation you agreed to will need to be met. A failure to do so can result in legal action and damage to your credit rating.

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If you end up having problems with your co-borrower, the Australian Securities and Investment Commission (ASIC) recommends seeking legal advice to ensure that you are protected.

Free financial counselling is also available in Australia. If you want to speak to a financial counsellor, generally the first step is making contact with the National Debt Helpline (NDH). As well as running the helpline itself (1800 007 007), NDH helps consumers find individual counsellors and organisations near to them.

Original author: William Jolly

This article was reviewed by our Senior Finance Journalist Ellie McLachlan and Sub-Editor Jacqueline Belesky before it was published, as part of our fact-checking process.


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