Joint Personal Loans: What They Are And Where To Find Them

Joint borrowing involves applying for a loan or financing agreement alongside another individual, such as a spouse, partner, or family member. While this approach can improve your chances of approval and may help you secure better interest rates, it’s important to understand the potential downsides before committing.

One of the biggest concerns with joint loans is that both parties share full legal responsibility for the entire repayment, not just their share. If you’re considering a joint personal loan, it’s essential to understand how this type of borrowing works and decide if it’s the right fit for your financial goals and current situation.

Joint personal loans are a type of financing where two people apply together and are equally responsible for the loan. This means both applicants share access to the funds and are held accountable for making timely repayments if the loan is approved.

Both applicants’ credit reports are updated when a combined personal loan is approved. Both of your credit ratings are impacted by your repayment patterns, whether they are favorable or unfavorable. If properly handled, this shared obligation can help establish credit, but late payments might affect the credit histories of both parties.

At first glance, joint borrowing and cosigning may look similar, but they serve very different purposes and come with distinct responsibilities.

In a joint personal loan, both borrowers have equal rights to the loan funds and any assets purchased with them. They’re also equally responsible for repaying the loan. In contrast, a cosigner helps someone else qualify for a loan but has no access to the funds or ownership of any assets tied to the loan.

Although a cosigner is legally required to pay back the loan in the event that the principal borrower defaults, they are typically not expected to do so until an unforeseen circumstance arises. The primary purpose of cosigners is to support a loan application by using their credit history rather than their income. Conversely, joint borrowers pool their incomes, giving the lender greater assurance that the loan will be paid back on schedule.

There are situations where applying for a joint personal loan can be a smart financial move. If you’re unable to qualify for a loan on your own, perhaps due to a low credit score or limited income, applying with a co-borrower can improve your chances of approval. This is especially common among couples, where combining incomes may help secure a higher loan amount.

Partnering with someone who has a strong credit history can also work in your favor. You may be eligible for better interest rates and more favorable terms. In many cases, parents apply jointly with their children to help them get approved and begin building their credit. A joint application can open doors to financing that might not be available individually.

To apply for a joint personal loan, both applicants must meet certain eligibility criteria. They should be Indian residents employed with either a public sector company, a private limited firm, or a recognized multinational corporation (MNC).

The age requirement for applicants ranges from 21 to 60 years. A healthy credit profile is essential, with both individuals ideally having a credit score above 750.

Applicants must hold at least a graduate degree and have a minimum of one year of work experience. In terms of earnings, each applicant should have a monthly income of at least ₹25,000 to qualify for the loan.

Applying for a joint personal loan online is a hassle-free and convenient process. To get started, both applicants need to complete the joint loan application form by providing their individual personal and financial details.

To support the application, the following documents are required from both applicants:

• Aadhaar card
• PAN card
• Salary slips or income proof for the last 3 months
• Bank statements from the last 6 months

Once the form is submitted along with these documents, the lender begins the verification process. This includes checking the credit scores and financial backgrounds of both applicants. If everything is in order, the loan is approved, and the sanctioned amount is transferred directly to the borrower’s bank account.

Apart from the standard eligibility requirements, there are several additional factors that can influence your approval chances when applying for a joint personal loan. Being aware of these can help you prepare better and improve your chances of qualifying.

Relationship Between Co-Applicants
The nature of the relationship between co-applicants can significantly affect loan approval. Lenders often view married couples as more stable and lower-risk compared to friends or distant relatives applying together. This is why joint loans are commonly preferred by couples planning to manage finances together.

Loan Amount and Repayment Tenure
The amount you wish to borrow and the repayment period you choose can also impact eligibility. Higher loan amounts, such as a ₹4 lakh personal loan, and extended tenures usually come with stricter requirements. Lenders may expect a stronger credit score or a higher combined income from both applicants to approve such requests.

Opting for a joint personal loan offers a range of advantages that can make borrowing more efficient and affordable. Here are some of the key benefits to consider:

Access to Higher Loan Amounts
When you apply with a co-borrower, your combined income and credit profiles can help you qualify for a larger loan than you might receive individually. This is especially helpful if you’re planning a big expense like a wedding, renovation, or debt consolidation.

Lower Interest Rates
Having two applicants often reduces the lender’s risk, which may lead to more competitive interest rates. A strong credit score from either applicant can make a big difference in securing favorable terms.

Possible Tax Advantages
In certain cases, you may be able to claim tax deductions on the interest paid. For instance, if the loan is used for home improvement, the interest portion might be eligible under existing tax laws.

Shared Responsibility and Convenience
Filing one joint application is more efficient than applying separately. Plus, both applicants can share the repayment responsibility, making it easier to manage monthly installments.

Flexible Repayment Options
Many lenders, including Hero FinCorp, offer joint personal loans with flexible repayment tenures, up to 60 months, allowing you to choose a plan that fits your budget.

Thinking about applying for a joint loan? Before you move forward, take a moment to consider whether it’s the right fit for your financial situation. These questions can help guide your decision:

Can you qualify for the loan on your own?
If you or your potential co-borrower can meet the lender’s requirements individually, you may not need to apply together. In such cases, it’s worth weighing the benefits of a solo application versus sharing the responsibility.

Is joint borrowing necessary to share ownership?
If your goal is to co-own something like a house or car, a joint loan isn’t the only way to ensure both names are on the title. You can explore legal options to include both parties in the ownership documents, even if only one person applies for the loan.

Is joint borrowing your best shot at approval?
There are times when applying with someone else can improve your chances of qualifying, especially for larger loans like mortgages or home renovations. If your income alone isn’t enough to secure the loan, a joint application could help, but be aware of the shared responsibility that comes with it.

The Equated Monthly Instalment, or EMI, is one of the most crucial considerations when preparing to take out a combined personal loan. This is the set sum that you will pay back each month for the duration of the loan.

Using a joint personal loan eligibility calculator can make this process much easier. It not only helps you estimate your monthly EMI based on the loan amount, interest rate, and tenure, but also gives you a clear picture of the total interest you’ll pay and the overall repayment amount.

Before applying for a combined personal loan, this tool helps you understand the financial commitment involved, whether you’re budgeting in advance or evaluating loan possibilities.

The EMI for a joint personal loan is calculated using a standard formula that considers the loan amount, interest rate, and repayment tenure. Here’s the formula used to determine the monthly instalment:

[P x R x (1 + R)^N] / [(1 + R)^N – 1]

Where:
P is the principal amount, which is the total sum borrowed.
R is the monthly interest rate, calculated as the annual rate divided by 12 and then by 100.
N is the total number of monthly instalments or loan tenure in months.

This calculation gives you a fixed monthly amount you and your co-borrower will pay over the loan period. Knowing your EMI in advance helps you manage your monthly budget more effectively.

It’s also worth noting that joint personal loans can be repaid early through pre-closure, though some lenders may charge a fee for doing so. To maintain a healthy credit score, timely repayment is crucial for both borrowers throughout the loan duration.

Taking out a joint personal loan with a financially responsible partner who has strong credit and steady income can improve your chances of qualifying for a larger loan amount and a more competitive interest rate. But it’s important to weigh the potential downsides, such as the risk of one person falling behind on payments.

Discuss openly with your co-borrower how you will divide the repayment responsibilities and resolve any problems that may arise if you determine that a joint loan is the best course of action. To make sure you’re getting the best loan for your circumstances, it’s also a good idea to shop around and compare rates, terms, and lender possibilities.