Joint loans explained

Who This Guide Is For

Joint loans can appeal to a wide range of people. Whether you are a couple planning to merge your finances, friends looking to share the cost of a new venture, or family members supporting each other, understanding joint borrowing is crucial. This guide is designed for UK consumers who want to know how to apply for a joint loan, what it really means to share credit responsibility, and how to avoid common pitfalls. If you’re considering combining financial forces for a car, home improvements or consolidating debt, this article will help you weigh your options and proceed with assurance.

Simple Definition of the Topic

A joint loan is a form of credit taken out by two or more people together. Each person is equally responsible for repaying the debt. When you apply for a joint loan, the lender assesses the creditworthiness of all applicants, taking into account your combined income and credit history. Joint loans are commonly used for large expenses or when one person’s borrowing power alone might not be sufficient. Importantly, every borrower is responsible for the whole loan—not just a share. If payments are missed, it affects everyone’s credit record.

Why It Matters

Sharing a loan can be a practical way to finance significant purchases or consolidate debts. Combining incomes might allow access to larger loan amounts or better interest rates than individual applications. However, joint borrowing is not something to enter into lightly. The financial link between borrowers is formal and long-lasting, impacting credit ratings and personal relationships alike. If one party cannot pay, the other must cover the full repayments. This legal and financial commitment means that understanding the implications before signing is vital. Knowing the risks and rewards helps you protect your financial future and avoid unpleasant surprises.

How It Works (Plain English)

A joint loan involves two or more people applying for credit together. Here’s a step-by-step overview of how the process typically unfolds:

1. Application: Both (or all) borrowers fill out a loan application form. You’ll need to provide personal details, proof of income, and information about your financial circumstances. 2. Credit Checks: The lender performs credit checks on each applicant. They’ll look at your credit reports individually and may also use a combined assessment. 3. Decision: Based on the information provided, the lender decides whether to approve the loan, how much to lend, and at what interest rate. 4. Agreement: If approved, all applicants sign the credit agreement. This formalises your joint responsibility for the loan. 5. Funds Disbursed: The loan is paid out—usually into a joint account or to one nominated individual. 6. Repayments: You are both equally liable for the full amount. If one person stops paying, the other must make up the shortfall.

> "With joint loans, you’re ‘jointly and severally liable’—each of you is responsible for the entire debt."

7. Credit Linking: Your credit files become linked. This means future lenders can see the financial association and may use the other person’s credit behaviour when considering your applications.

Joint loans can be unsecured (like a personal loan) or secured against an asset (such as a car or property). The process is much the same, but secured loans carry the added risk of losing the asset if repayments are missed.

Things to Know Before You Apply

• Trust is vital: Only take a joint loan with someone you trust. Both parties have equal legal responsibility.
• Credit impact: Your credit files are linked for as long as the joint loan exists (and sometimes beyond). If one person falls behind, both credit scores will suffer.
• Repayment plans: Discuss upfront how repayments will be managed. Consider setting up a joint account for payments.
• Exit strategy: Think about what happens if your circumstances change. Ending a joint loan early can be costly or complicated.
• Legal implications: In the event of a relationship breakdown or falling out, both parties are still liable for the loan. Lenders will not intervene in disputes.
• Alternatives: Assess whether a joint loan is the best fit or if other options could offer more flexibility or less risk.

Jargon Buster (Key Terms Explained)

Term	Meaning
Joint and Several Liability	All borrowers are individually and collectively responsible for the full loan amount.
Credit Link	Your credit files are connected, affecting future borrowing decisions.
Unsecured Loan	A loan not backed by an asset.
Secured Loan	A loan backed by an asset (e.g., house, car).
Guarantor	Someone who agrees to repay the loan if the main borrower defaults.

Pros and Cons

Pros:
• Access to larger loan amounts by combining incomes.
• Potentially better interest rates with higher joint creditworthiness.
• Shared responsibility can make repayments more manageable.

Cons:

• Joint and several liability means full responsibility for the debt if the other party can’t pay.
• Credit files are linked, affecting future borrowing.
• Personal relationships can be strained by financial disagreements.

Alternatives You Should Consider

Before committing to a joint loan, consider whether one of these options might suit your needs better:
• Individual Loans: If your credit score and income are strong, you may qualify for a good rate alone, avoiding the risks of a joint arrangement.
• Guarantor Loans: Here, a third party (often a family member) promises to cover repayments if you cannot. This avoids direct credit linkage with a partner or friend.
• Credit Cards: For smaller expenses, a credit card—used responsibly—might offer enough flexibility without a formal joint agreement.
• Savings: If time allows, saving up for your goal could be the safest option, avoiding debt altogether.
• Peer-to-Peer Lending: Some online platforms allow people to borrow from individuals rather than traditional banks, sometimes offering more flexible terms.

Always consider your motivations and financial stability before choosing any borrowing route.

FAQs

Can I remove someone from a joint loan? Not usually. Joint loans are a binding agreement. To remove a party, you generally need to pay off the existing loan and, if necessary, apply for a new one in a single name.

Does taking a joint loan help build my credit? If repaid on time, yes—it can improve both parties’ credit scores. However, missed payments harm both credit records.

What if my partner or co-borrower can’t pay? You are legally responsible for the entire loan. Lenders can chase either or both of you for the full balance.

Will a joint loan affect my ability to get credit in the future? Yes. Your credit file is linked to the other borrower’s, which future lenders will see. Their financial behaviour can influence your credit offers.

Are joint loans only for couples? No. Friends, siblings, parents and adult children can all apply together. The key is mutual trust and understanding of shared responsibility.

Get Started or Learn More (CTA)

Thinking about a joint loan? Review your options carefully and ensure you’re comfortable with the responsibilities. For more advice or to explore joint loan products, visit Kandoo’s website or speak with one of our finance specialists today.