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Everyone wants to reach the goal milestone promptly. This could be anything from buying a home to settling debts. Each of these contributes to lifestyle improvement. However, one struggles to do that with limited salaries and savings. Moreover, you cannot wait for the situation to improve. It may take months or even 10-15 years.
Naturally, one cannot wait that long to live the dream life. Thus, they seek the best ways to finance. They prefer options that may help split the costs. It not only reduces the expense but keeps the budget intact.
One such option is a joint loan. It is the facility that helps two individuals split the loan costs. For example- if you want to buy a car as an earning couple, consider it. The loan provider considers the credit histories and income of borrowers. Even one of the individuals with sound finances may help fetch affordable rates. The credit and other aspects reveal the strong possibility of repaying the dues. Moreover, you could reduce, interest, and monthly payments with the loan.
However, it is not ideal for everyone. For example- if you hold the facility to manage the repayments, you don’t need it. Individuals with inconsistent pay can combine finances with a regular income. It helps fill the gap and avoid skipping payments.
The blog discusses whether you should combine finances with a joint loan.
What does a joint loan imply?
A joint loan is a facility where two or more individuals apply together. The arrangement could be between family members, business partners or friends. Generally, only 4 people can be liable for a joint agreement. The loan works just like any other loan. It could be secured or unsecured. Choose the right one by analysing your needs and credit status.
You must repay the specific amount and interest by the due term. Applicants can split the costs according to financial potential. Individuals can either split it in equal instalments or one can pay more. The interest and other fees remain the same throughout the loan period.
Should I consider a joint loan with my spouse?
It is a constant question among young married couples. However, they struggle to identify the best time to apply jointly. Don’t worry, check the following signs to apply for a joint loan:
1) Cannot manage repayments individually
It is one of the prime reasons that couples consider joint application. You may want to borrow money but are unsure of repayments. It could be due to a debt-ridden profile, or low and inconsistent income.
It may prove risky from the financial and credit perspective. Non-repayment may lead to additional penalties. It may affect the individual credit score. Thus, applying jointly safeguards applications and ensures regular payments.
Choosing the best joint loans for couples helps meet the purpose. Analyse the best interest rates, APR, costs, and monthly instalments. Identify the liabilities each share as a couple on the loan. Check whether you can repay your share comfortably. It reduces the financial burden. It also helps repay the dues timely.
2) You don’t meet the credit score criteria
Most individuals cannot meet the credit criteria to get the loan. Most lenders avoid lending to individuals with a falling credit score. It reveals inconsistent credit and finances. It showcases one’s inability to repay the amount timely.
Alternatively, they provide the option to co-sign the loan agreement. One can choose their partner over the joint agreement. However, the person should have a stellar credit history and finances to qualify. The lender considers both credit profiles for approval. Thus, it would not restrict you from meeting your goals timely.
You can even improve the chances of getting better rates. Repay some of your pending payments. Close any other joint accounts that you don’t use now. Close it especially if the other person has a low credit history.
3) Want to borrow a higher amount
Sometimes, you need a lump sum to meet your needs. For example- you may need it for home renovation. However, credit and financial status restrict you from getting one. Alternatively, you cannot wait to save enough. Here, a joint finance agreement may help.
You may combine the financial potential. It automatically increases loan affordability. Thus, you may qualify for a higher amount. A joint application reduces the risk for the loan provider. Hence, you may get the loan approval instantly.
4) Trust the other person with finances
You must not consider a joint loan if you don’t trust the person. Whether you are the husband or the wife, trust is important. Check whether you can rely on him/her with your finances. Consider the following aspects before signing the agreement:
Is he capable enough to understand and help achieve your goals?
Does he share the financial potential to help you with payments?
Can he make payments if your financial situation changes?
Can one support you if something goes wrong in between?
Is your relationship strong enough to get through without conflicts?
Getting answers to these questions would help decide the best. It nurtures your improvisation and fills up the loopholes before application.
5) You can’t find any better financial option
As mentioned above, the loan may not work for everyone. Hence, understand your options before applying. Check whether other facilities grant the flexibility to achieve the goal individually.
Some options like a private installment loan provide the best flexibility. You can split the purchase costs in affordable instalments. The loan offers the flexibility to choose the repayment term and amount. However, picking a longer repayment term means paying more overtime. Decide the right one according to your finances and payment potential.
Alternatively, consider a joint loan if you know it inside out. Analyse the pros and cons of joint loans before applying.
Advantages and Disadvantages of a joint personal loan
Taking up a loan is the biggest decision. Moreover, if signing up with a partner, improvisation is a must. Familiarising yourself with the pros and cons of joint loans may help. You can then decide whether it is right for you. It saves you time and helps check other options.
Pros of joint loans
-Jointly applying for grants helps get a bigger lump sum on the loan. It helps fetch low interest rates and reduces the overall loan repayment costs.
-Individuals with poor credit history may improve their credit rating by partnering with one with a stellar credit.
-It helps you split the loan costs. It reduces the liability each person shares. You can use the money saved for other goals.
Cons of joint loans
-It is challenging to find a person you can trust with your finances. At the same time, you stand the risk of revealing your finances.
-Applying jointly means linking your finances. Financial activities you undertake may affect the other person’s finances positively or negatively. This works vice-versa. Thus, you share the risk of losing your credit score.
-Partner’s finances may change and he cannot repay the dues. Thus, you will be responsible for paying the due amount. Precisely, you will pay your and the person’s share to complete the loan agreement.
Bottom line
Sharing finances with the other person depends on multiple factors. It could be trust, financial background, and intention. One does not help if he does not intend to. Analyse the loan terms and implications in detail. Improvise whether this could be the right one for you. Next, check if you can pay the dues if the other person cannot. It helps you understand the right move.