Joint Loans for debt consolidation
Personal loans have, for the longest time been the lifesaver for most borrowers. These loans have helped individuals to pay rent, buy assets, boost businesses, pay for medical bills, and sponsor vacations.
Personal loans are preferred because they are easy to qualify for, come with unmatched flexibility and there are lots of lenders to borrow from. As long as you have a good credit score, you’ll easily get loans to take care of your financial needs.
But, on the flipside, accumulated debts are a pain in the neck. And, that’s where consolidation loans come in. In this article, we’ll explore all about joint loans for debt consolidation and the best lenders for such in the industry today.
- Rep APR
- Term
- Max loan limit
Marcus
- 6.99%-19.99%
- three to six years
- $3,500 - $40,000
Discover
- 6.99%-24.99%
- 36-84 months
- $2,500-$35,000
Payoff
- 5.99%-24.99%
- 24-60 months
- $5,000-$40,000
- APR range
- Fees
- Terms
- Amounth
- Unemployment protection
Bank 1
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 2
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 3
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Table of Contents
How joint loans for debt consolidation loan works?
Debt consolidation loans help borrowers bring together different loans with different rates into a single debt with a single monthly repayment. This is meant to clear your existing loans by a single repayment.
Joint debt consolidation loans work the same way. Except for the fact that, for these, different borrowers with accumulated debts come together and apply for a single loan to offset their debts.
They, then remain with their new loan which they share in its monthly repayment. Joint debt consolidation loans are often best for households looking to tackle bad debts. Therefore, spouses, close friends, or family members are the most preferred.
If you don’t qualify for debt consolidation because of a poor credit score, then joint consolidation loans will bail you out. As long as you pair up with a borrower(s) with a good credit score, you’ll be good to go.
Combining your incomes, credit histories and financial states will have you winning the approval of most lenders. Apart from clearing your loans, you also stand the chance of improving your credit score.
Once approved, you’ll sign an agreement with the lender. The agreement contains the terms of the loans and all the names and details of borrowers. It also contains the loan rate and the monthly repayment amount.
The lender will either wire the funds to your personal accounts or send them to a single borrower so you all share. Alternatively, some lenders will also opt to send the loan amount directly to your creditors.
Remember, joint consolidation loans are meant to improve your chance of qualifying for consolidation. Only go for it if you can’t qualify on your own.
When to get a joint loan for debt consolidation?
Joint consolidation loans are good for repaying accumulated debts. However, knowing when to go for one is crucial. The following are the circumstances when you should consider going for one;
- When you have a poor credit score – most lenders don’t easily offer loans to borrowers with bad credit scores. And when they do, it often comes with high interests and inflexible terms. Applying with other borrowers can therefore bail you out. Joint consolidation loans will have lenders considering combined credit profiles of all the borrowers applying. You’ll hardly fail to qualify.
- When looking for higher limits – if you can’t qualify for enough funds to clear your debts, then applying jointly could boost your chances. Getting one with borrowers with good credit profiles will make it even easier for you.
- When looking to reduce expenses – if applying for consolidation jointly with other lenders will prove cheaper, then you can give it a shot.
- If you have a personal relationship with co-borrowers – Only apply for joint personal loans with borrowers you know at a personal level. Since you all bear equal responsibility to the loan, it’ll be easier to solve possible misunderstandings with such people as close as family members. With such co-borrowers, following up on late and missed repayments is way easier.
Requirements to qualify
Different lenders have different requirements for those going for joint debt consolidation loans. Prioritize online lenders and credit unions. They often have friendly requirements compared to traditional brick and mortar banks.
For most lenders, the basic requirement is that you should have attained 18 years or more during application. You should also be a legal resident of the United States. To verify this, the lender will require copies of your ID, driving license, or passport.
Your income profile will also play a major role. A higher debt-to-income is often a red flag for most lenders. It’s an indicator that your income is not sufficient to cover the repayment of a new loan.
Your debt repayment history also plays a role with some lenders. However, most lenders will hardly consider this, especially when applying jointly.
Remember, you’ll meet these requirements jointly with your co-borrowers. Therefore, missing out on one will not automatically lead to a loan disqualification.
You also want to exercise extra caution when choosing co-borrowers. Ensure they are not people who’ll default the loan. A couple of missed repayments from just one co-borrower can severely hurt the credit profiles of the rest of the borrowers.
While selecting your co-borrowers be sure to go for ones with better credit profiles. This will boost your chances of qualifying for loans with most lenders.
Pros and cons
| Pros | Cons |
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Improved chances of qualifying for a loan – Applying jointly with borrowers with good credit profiles improves your chances of qualifying for consolidation with most lenders. When you apply jointly, you’ll also have to fulfill the requirements jointly, which is easier |
Missed and late repayments by just a single borrower can severely hurt the credit profiles of the other lenders. This will work to the disadvantage of those who keep up with repayments |
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Higher loan limits – Joint loans for debt consolidation improves your chances of qualifying for higher loan limits. This is especially important if you have a bad credit history and have been denied higher limits based on that. As long as you jointly meet the qualifications, you’ll be awarded a higher loan limit. |
You risk losing your good relationship with your co-borrower if because of you defaulting, their credit profiles get a negative report. |
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Joint consolidation is cheaper – Applying jointly for consolidation will have you sharing on the interests and monthly repayment. This is often cheaper compared to applying alone. And, you’ll also save a lot on interests. |
Repaying all your debts will have most credit agencies listing you positively. This will have you qualify for new loans. Failure to resist the temptation to tap on new loans, especially when you don’t need them can place you in a recurrent debt cycle that you’ll hardly recover from |
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Fixed repayment terms – joint consolidation loans come with fixed repayments terms and rates. This way, you won’t be affected by a possible rise in interests. You’ll also easily budget your money so you don’t easily miss repaymentsv |
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Boosts your credit score – debt consolidation loans lower your credit utilization ratio. This is a crucial indicator most credit agencies look for to assign you a positive score. Repaying all your debts at once will also have the credit agency listing you positively. |
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How Are Debt Consolidation Loan Interest Rates Determined?
Your lender, credit profile, income, credit history, and market average are what determines the interest rate you’ll pay.
Borrowers with bad scores are likely to part with higher rates. However, applying jointly with borrowers with good scores will bail you out.
The ability of you, and your co-borrowers to repay your loan will also determine what interests you pay. To determine this, lenders will look at your debt-to-income ratios. A low debt-to-income ratio will earn you lower rates.
The type of interest your loan attracts will also determine if you’ll pay a higher or lower rate. Fixed rates will stay the same throughout your loan term. This will help you budget and can save you the costs associated with the turbulence in the market rates.
Varied rates, on the other hand, are a gamble. They change according to the changes in the market rates. This will have you pay higher rates when there’s a rise in the market average. But you’ll also save when the market average falls.
The lenders above have some of the best rates in the market today. Be sure to approach any of them. Compare their rates and work with the one offering the lowest. Prequalification will also help you to compare their rates without negatively affecting your credit score.
Alternatives to Joint Loans for debt consolidation
If joint consolidation loans don’t seem to work for you, then you can tap on any of the following options;
- Home equity – this acts as a second mortgage. You basically use your home as collateral to secure your loan. Upon approval, your lender wires all the funds in a lump sum. You’ll then use this to pay off your existing creditors. Please note that repayment for home equity starts immediately after you receive the funds. They also come with fixed interest rates. However, you risk losing your property should you breach the lender agreement. You, therefore, want to ensure you have a proper loan repayment plan in place, and a good fallback plan so you don’t easily miss out on your repayments
- Debt relief services – these are offered by non-profit companies also called debt settlement companies. They are usually an excellent option for borrowers who don’t qualify for debt consolidation. They negotiate lower rates on your behalf. They basically do everything possible to get your creditors to accept lower rates than the actual loan amount. These companies, however, tend to charge higher fees. Before committing, ensure you sample different companies comparing their rates, and thoroughly go through their policies to find one whose terms conform with your financial goals.
- Credit counseling – credit counseling is meant to help borrowers with hands-on tips on money management, budgeting, and debt management. They also aim to help you avoid hopeless debt situations or bankruptcy. They also negotiate with creditors on your behalf for lower rates, a waiver for late repayment fees, and flexible loan terms. These companies have professionals who are trained to work with creditors to develop a personalized credit plan that’ll help you repay your loan without a struggle. These companies will also help develop a Debt Management Plan (DMP) – a program that lets you make a single monthly debt repayment. You’ll deposit your funds with the company which will then proceed to repay your existing unsecured loans including medical bills, student loans, and credit card debts.
Please note that these alternative means of consolidation often attract larger fees, most of which are usually hidden. That could make them even more expensive than your actual debts. Exercise extra caution so you don’t sink deeper into debts.
Frequently Asked Questions (FAQ)
Yes. you can take a joint consolidation loan with your spouse, close relative, or friend. However, the rule still remains that all of you are equally responsible for the loan. You’ll, therefore equally share the monthly repayments and other loan charges.
Debt consolidation is only worth the shot if it attracts lower interests than what you pay for your current debts. Also if you have a credit score of above 600, debt consolidation can work for you.
if you use it well, a debt consolidation loan can actually boost your score. Paying your debts will have your creditors sending a positive report to credit agencies. Similarly, the new loan will also reduce your debt-to-income ratio, hence boosting our score.
Online lenders, credit unions, and banks are your best shot. The table above contains some of the best lenders you can reach out to.
Personal loans and debt consolidation loans bear a striking resemblance. However, where you don’t qualify for personal loans, debt consolidation can bail you out.Personal loans and debt consolidation loans bear a striking resemblance. However, where you don’t qualify for personal loans, debt consolidation can bail you out.
