What Is a Joint Loan?
With a bit of help from family or friends, a joint loan could improve your chances of approval or help you qualify for better rates.
If you've struggled to get an individual loan or are unhappy with the rates you're being offered, you may benefit from including another person in your application. Alternatively, someone may have asked you to be a cosigner or co-borrower on their loan.
These arrangements can work in a few different ways, and understanding the differences is important. This article will explain your options and help you decide whether a joint or cosigned loan makes sense for you.
What is a joint loan?
A joint loan is a loan where multiple people apply together and share ownership, access to funds and responsibility for repayment.
The lender will review the credit file of each applicant and, if approved, the loan will appear on each person's credit report. There may be a designated primary borrower, while the other applicants are referred to as coborrowers or joint applicants.
Regardless of the title, everyone who signs the loan agreement is legally responsible for making payments on time. If payments are missed, the negative information can appear on each person's credit report and damage their credit score.
What is a cosigned loan?
A cosigned loan is similar to a joint loan but has some important differences.
With a cosigned loan, the primary borrower applies for the loan and adds another person, known as a cosigner. Unlike a co-borrower, the cosigner does not have ownership of the loan funds and is not expected to make payments unless the primary borrower fails to repay the loan.
However, the cosigner is still taking on significant responsibility. If the primary borrower misses payments or defaults, the lender can require the cosigner to repay the debt.
Much like joint loans, lenders will usually perform a hard credit inquiry on the cosigner and the loan will appear on their credit report. Any missed payments can negatively impact their credit score.
Benefits of joint and cosigned loans
Joint and cosigned loans are generally less risky for lenders because multiple people are responsible for repayment.
For borrowers, this reduced risk can translate into higher approval odds, lower interest rates and better loan terms. If you've struggled to qualify for a loan on your own, adding a financially stronger applicant may improve your chances.
However, these arrangements also create a shared financial obligation. Before agreeing to a joint or cosigned loan, both parties should understand the risks and be comfortable with the responsibility they are taking on.
How to get a joint or cosigned loan?
Not all lenders offer joint or cosigned loans, so your first step is finding lenders that support these options.
When available, the process varies between lenders. For online applications, it usually starts with the primary applicant providing their personal information (e.g. name, address, income, etc.).
Either before or after a soft credit check, the applicant may be given the option to add another person. This option is not always obvious, so look for terms such as "joint applicant," "co-borrower" or "cosigner" during the application process.
Before adding another person to a loan, make sure everyone understands exactly what they are agreeing to. A joint loan or cosigned loan can improve access to credit, but it also creates a long-term financial connection between the borrowers.