Taking out a loan can be a huge financial responsibility. Also, not all people immediately qualify for loans. If you’re one of these people, you may be looking for alternatives when applying for loans with banks or local money lenders. One of those alternatives is called a joint loan. This makes it easier to get approved for a loan. Read on to find out more about joint loans and how they work.
What is a joint loan?
A joint loan is one that you take with another person. You both take responsibility for paying back the loan, and you both have the right to use the money.
Joint loans make approvals easier because two people are sharing the responsibility. It’s easier for two people to pay back a loan than just one person. Banks and lenders will have more confidence in the ability of two people to repay one loan. Thus, you are more likely to get approved for a joint loan than one that you apply for by yourself.
Whom can you take it with?
You can take a joint loan with any trusted person – a friend, colleague, relative, parent, or spouse. This is called your co-borrower. Just make sure this person is someone you trust with money and is financially literate. Remember that your co-borrower will have access to the funds and have equal rights to use the money.
One thing to consider is your co-borrower is also equally responsible for paying back the loan. With that, both of you must have the financial capacity to pay the monthly dues. If your co-borrower does not have the means to pay back their part of the loan, that responsibility falls back to you. With that, it’s best to choose another person with a better financial status as your co-borrower.
Also, any time your co-borrower becomes irresponsible in using the loan money, you will get affected as well. You will have less money to use for the things you need. This may then cause conflicts in your relationship with your co-borrower.
For these reasons, it’s important to pick a co-borrower you can fully trust when it comes to money. If you have any doubts, it’s better to choose another person. The potential stress a joint loan can bring to your relationship is not worth it.
What are your responsibilities?
If you take a joint loan, you and your co-borrower are both responsible for paying back the loan. In other words, you each have an equal share of the monthly obligations to pay. For example, if your monthly repayment on a joint loan amounts to S$300 per month, you and your co-borrower must each pay S$150 per month.
If your co-borrower fails to pay his or her share, you will have to shoulder it. This works both ways too – if you do not pay for your share, your co-borrower will have to cover it.
But if both of you have the means to pay the monthly dues, you will be able to pay off the loan more easily. Both of you will have less of a financial burden to handle.
Conclusion: Why should I take out a joint loan?
A joint loan increases your chances of getting approved, especially if your financial status does not meet the requirements of the bank or lender. Choose a co-borrower you trust with money, and make sure that they have the means to pay back the loan as you do. This way, you can more easily take out a loan and pay it back.
