All You Need to Know about Joint Personal Loan

Personal loans are the simplest of solutions when you need funds for your personal or business use. They are collateral-free, and the personal loan interest rates are affordable so that you can repay the loan with ease.

While you can apply for a personal loan individually, there is also a concept of a joint loan. Let’s understand what it is all about.

What is a joint personal loan?

A personal loan taken together with two or more borrowers is called a joint personal loan. So, if you apply for the loan together with your spouse, child, parents, or even a friend, the loan will be called a joint loan. The individual applying with you would become the co-applicant or co-borrower and share in the loan repayment responsibility.

How does a joint personal loan work?

When you add another borrower to the loan application, it is treated as a joint loan application. The co-borrower should have a source of income and a credit score. You would have to specify the co-applicant’s details in the loan application form and submit their documents.

The lender would assess the personal loan eligibility of both the applicant and the co-applicant and then sanction the loan.

Once the loan is sanctioned, the EMI can be paid by either applicant or by both. If any borrower defaults on the payment, the responsibility will fall on the other to repay the loan.

For example, say A and B apply for a joint personal loan. A pays the EMIs every month. However, A loses his job and is unable to pay the EMI after a year. In this case, B would have to bear the responsibility of paying the EMIs as and when they are due.

Benefits of joint personal loans

Joint personal loans are helpful when you have a low credit score, a limited income, or default history. In any of these cases, your personal loan eligibility is adversely affected, and it might make you ineligible for the loan. Even if it is granted, the personal loan interest rate might be high.

In such cases, joint personal loans can help. Here’s how:

• The income of the co-applicant, when added to yours, increases the overall income. This allows you to avail of a higher quantum of loan.
• If your credit score is low, a co-applicant with a high score can help you get the loan.
• Your loan application can be processed quickly due to increased eligibility.
• You can get an affordable rate of interest on the loan.

In short, joint personal loans improve your eligibility and help you borrow on favorable terms.

Challenges with a joint personal loan

Though a joint personal loan is beneficial, it has its challenges too. Here are some of the issues with the loan –

• In a joint loan, each applicant faces the burden of repaying the loan.
• Joint personal loans are not as popular as individual ones. As such, not all lenders might allow you the facility of availing of a joint loan.
• If there is a default in repayment, the credit score of all the applicants suffer.
• Joint loans involve assessment of the eligibility parameters and documentation of the co-applicants as well. This increases the loan approval duration and might delay the sanction.
• Finding a suitable co-applicant might also be a challenging task.

The bottom line

Understand what joint personal loans are and how they work and know the pros and cons before applying for them. If you are opting for a joint loan, find a co-applicant who can improve your eligibility and share loan repayment responsibility. You can also use the personal loan EMI calculator to find an EMI that is affordable for all borrowers. This would make repayment easy and convenient.

Joint loans, when used wisely, can help you get the best deal on your loan.