Some things in life are better shared…and that can be the case when it comes to your finances.
In fact, many Australians share financial products like bank accounts, credit cards and home loans, but did you know you can also share a personal loan? Say hello to the solidarity personal loan, a banking product you might not even know you needed in 2022.
So, what is a solidarity personal loan?
As its name suggests, a “solidarity personal loan” is shared between two people. These “co-borrowers” apply for and repay the loan together.
Depending on the lender, these loans can be used to cover a range of expenses from home renovations and wedding expenses to buying a new set of wheels. While generally people apply for these loans with their partners or spouses, in some cases you can also apply with a parent, sibling, family member or even a friend.
However, there are certain advantages and risks associated with taking out a joint personal loan that should be known before applying. It is also important to keep in mind that each lender may have different eligibility criteria, so it is crucial that both applicants meet the requirements.
Solidarity personal loans: the advantages
- You may have a higher chance of approval: The financial history and credit rating of both applicants are taken into account for the joint loan. This means that the lender assesses the details of both co-applicants to determine if together you are suitable to repay the loan.
- You may be able to borrow more: Similarly, since the financial circumstances of both applicants (such as income and credit history) are taken into account, you may be eligible to borrow more than if you applied alone.
- You may be able to consolidate a larger amount of debt: Debt consolidation loans can take the form of joint loans. So if you and your co-borrower have a debt to settle, this may be one way to do it.
- Cover the cost of a shared asset: If you’re covering the cost of a big shared purchase, a joint loan can be a good way to help both parties make regular payments and stay on track to pay down debt.
Solidarity personal loans: the risks
- Relying on another person for reimbursements: The truth is that by taking out a loan with another person, you are sharing the responsibility and thus trusting someone to do half the job. The downside of joint loans is that if things go wrong and the other person doesn’t repay their share, that could mean you end up responsible for the entire payment or even risk legal action if the loan is not paid.
- You can overborrow: Just because you can borrow more (in the eyes of your lender) doesn’t mean you should. Don’t just enter into a joint loan so you can get a bigger sum if you and your co-applicant will struggle to pay it back.
- Your credit rating may deteriorate: When you or your co-borrower miss repayments or fail to repay your loan, it will negatively impact both of your credit scores. As mentioned above, you trust someone else to make repayments to keep yours and their credit rating healthy.
- This may affect the relationship you have with your co-applicant: It’s no secret that money can ruin relationships, and joint personal loans are no exception. Before you take out the loan, make sure you’ve had the right conversations with your co-applicant and that you both understand the joint liability that comes with it. Also consider the financial situation of the person you are taking this loan with – think about things like job security, financial history and even their credit rating.
Not sure if a joint loan is right up your alley, but want to compare some personal loan options right now? Check out these offers below!
Joint Personal Loan FAQs
1. Do all lenders offer joint loans? No, it varies from lender to lender.
2. With whom can I apply for a joint personal loan? You can apply for a joint personal loan with a partner, spouse, parent, sibling, relative or even a friend. Remember, this is a shared commitment, so make sure you know the financial background of the person you are applying with.
3. How many people can be on my joint personal loan application? A joint loan refers to a type of personal loan where two people are on the application rather than just one.
4. Can I apply for a solidarity loan online? Yes, there are many online loan options for joint personal loans, from more traditional banks to online-only lenders.
5. How can I apply for a joint personal loan? To apply for a joint personal loan, you will need the personal, financial, and employment information of you and your co-applicant. You can apply for a joint personal loan in branch, by phone or online, depending on the lender you have chosen.
6. Can I get a joint personal loan with bad credit? It depends on your lender as well as your co-applicant’s credit history. If your co-applicant has a better credit score than you, it may increase your chances of getting approved for the loan despite your bad credit score. However, this is not guaranteed.
7. Are joint loans easier to obtain? As with a regular personal loan, you still need to go through the application and approval process to get a joint personal loan. As mentioned above, you can increase your chances of being approved and borrowing more by choosing to apply with another person rather than alone.
Want to learn more about personal loan options? Visit our personal loan comparison hub for more information!
* DISCLAIMER: The comparison rate combines the lender’s interest rate, fees and charges into one rate to show the true cost of a personal loan. The comparison rates displayed are calculated on the basis of a loan of $30,000 with a term of 5 years or a loan of $10,000 with a term of 3 years as indicated, on the basis of monthly principal and interest repayments, on a secured basis for secured and unsecured loans. basis for unsecured loans. This comparison rate applies only to the example or examples given. Different amounts and durations will result in different comparison rates. Costs such as withdrawal fees or prepayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may affect the cost of the loan.
^ See Mozo Experts Choice Personal Loan Awards information
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