How to Get Approved for a Joint Personal Loan With Bad Credit

Getting approved for a personal loan with bad credit can be challenging, but adding a co-borrower with better credit can improve your chances Joint personal loans allow two people to apply together and combine their income and credit histories This opens up more lending options, often with better rates.

In this comprehensive guide we’ll explain everything you need to know about joint personal loans for bad credit. including

• Pros and cons of joint loans
• Tips for finding a co-borrower
• Minimum credit score requirements
• Strategies for getting approved
• The best lenders for joint loans
• Alternatives if you can’t find a co-borrower

What Are Joint Personal Loans?

A joint personal loan has two borrowers who apply and are both responsible for repaying the loan. The lender reviews both applicants’ credit histories, debt-to-income ratios, and other eligibility criteria.

The main advantage of a joint loan is that you can combine your finances with someone who has better credit and income. This helps offset negatives on your own application and opens up lending options you may not qualify for solo.

Joint loans come in two main structures:

• Co-signed loans – The primary borrower applies and a co-signer with better credit guarantees the loan. The co-signer is equally responsible for repaying the debt.

• Co-borrower loans – Two borrowers apply together and share responsibility for the loan. This allows pooling of income/assets and leverages the second applicant’s credit profile.

The terms “co-signer” and “co-borrower” are often used interchangeably, but there are technical differences. We’ll explore those next.

Co-Borrower vs Co-Signer: What’s the Difference?

While co-borrowers and co-signers serve a similar purpose on joint loans, there are some key differences:

Credit reporting – With a co-borrower loan, the loan appears on both applicants’ credit reports and payment history affects both scores. On a co-signed loan, only the primary borrower’s credit is impacted.

Loan access – Co-borrowers may both access and use the loan proceeds. Co-signers usually don’t have access to the funds but must still repay if the primary borrower defaults.

Income consideration – Lenders factor in income from both co-borrowers when approving the loan. They’ll only consider the primary borrower’s income for co-signers.

Rates and fees – Rates and terms are based on both co-borrowers’ profiles. Co-signers usually don’t impact rates but may help the primary borrower qualify.

Lender options – More lenders offer co-borrower loans than allow co-signers, who are viewed as higher risk.

As you can see, co-borrower loans give joint applicants more equal standing, while co-signing arrangements are more hierarchical.

The Pros and Cons of Joint Personal Loans

Joint personal loans have several potential benefits, but also come with tradeoffs to consider:

Pros

• Better rates – Adding a co-borrower with good credit can help you qualify for lower interest rates. Each 0.25% rate drop on a $10,000 loan over 5 years saves you about $125.

• Larger loan amounts – Lenders may approve you for more money with a co-borrower to supplement your income. This provides access to funds you may not get on your own.

• Build credit – As an authorized user, joint loans can help build the secondary applicant’s credit history. On-time payments are reported to the credit bureaus.

• Easier approval – Even a fair credit co-borrower can improve the chances of approval and provide a credit boost.

Cons

• Shared responsibility – All borrowers are individually and jointly liable for repaying the debt. Default by your co-borrower still hurts your credit and leads to collection actions.

• Strained relationships – Late or missing payments can cause tension with friends/family members. Be sure co-borrowers are responsible and can afford the monthly payments.

• Complex finances – Combining income and debts complicates personal finances, especially when separating the loan in the future.

• Fees – Some lenders charge application or origination fees, raising the cost of borrowing. Shop around for zero fee loans.

Overall, the main tradeoff is putting your credit in someone else’s hands. Make sure to only apply jointly with someone you completely trust.

Finding a Trustworthy Co-Borrower

The key to success with joint loans is choosing a reliable and financially stable co-borrower. Avoid high risk candidates who may jeopardize your credit. Good co-borrower candidates include:

• Spouse or domestic partner – Share finances already.
• Family members – Parents/siblings with good credit may be willing to help.
• Close friends – Those you trust can be great options.
• Roommates – Share rent and bills already.
• Business partners – Aligns financial interests.

Before moving forward, have an open discussion about expectations:

• Review loan terms and required monthly payments. Make sure it fits their budget.
• Agree on which borrower will make the monthly payments.
• Create a contingency plan if someone can’t pay.
• Formalize the arrangement with a co-borrower agreement.

Doing your due diligence reduces lending risks and maintains strong relationships.

What Credit Score Is Needed?

The minimum credit score required for joint personal loans typically falls in the fair range (around 640 FICO). However, each lender sets their own eligibility standards.

Here are benchmark credit requirements among top online lenders:

• LendingClub – Minimum 600 FICO
• Prosper – 640
• Lightstream – 660
• SoFi – 650
• Upstart – 620

While you can get approved with fair/poor credit, interest rates are driven by the applicant with the best score. For example, LendingClub offers rates from 9% for good credit co-borrowers but up to 36% for those with poor scores.

Aim for at least one borrower with very good or excellent credit in the 670+ range to maximize savings. This unlocks the lowest rate tiers from lenders.

5 Tips for Getting Approved

Follow these tips when applying for a joint personal loan with bad credit:

1. Shop with a co-borrower first – This instantly gives you a credit boost and two income sources. Even if your co-borrower has average credit, it can offset negatives on your report.

2. Apply for small loan amounts – Lenders are more comfortable approving smaller joint loans under $10,000. Requesting less can increase your chances.

3. Leverage income and assets – Highlight your combined financial resources like income, savings, retirement funds and real estate equity.

4. Explain any credit problems – If you have late payments or collections, articulate how the situation has improved. Provide context.

5. Consider using collateral – Backing your loan with an asset, like a car title, gives the lender security and improves approval odds.

With some strategic planning, you can overcome bad credit and qualify for a reasonable joint personal loan.

The 5 Best Lenders for Joint Loans

We evaluated over a dozen top online lenders and found these provide the best joint loan options:

1. LendingClub

• Minimum credit score: 600
• Loan amounts: $1,000 to $40,000
• Rates: 8.98% to 35.99% APR
• Origination fee: 3% to 6%

LendingClub offers online joint loans via their lending marketplace. They have flexible credit requirements, competitive rates and quick funding.

2. Upgrade

• Minimum credit score: 580
• Loan amounts: $1,000 to $50,000
• Rates: 8.49% to 35.99% APR
• Origination fee: 1.85% to 8.99%

Upgrade approves joint applicants with poor/fair credit. They allow co-borrowers and provide fast decisions with funds in 24 hours.

3. SoFi

• Minimum credit score: 650
• Loan amounts: $5,000 to $100,000
• Rates: 9% to 20% APR
• No origination fees

SoFi has some of the lowest APRs but requires good credit. Excellent for large joint loans thanks to high borrowing limits.

4. Payoff

• Minimum credit score: 640
• Loan amounts: $5,000 to $40,000
• Rates: 8.49% to 29.99% APR
• No origination fees

Payoff is a top choice for debt consolidation and accepting co-borrowers. Apply online for quick decisions.

5. Best Egg

• Minimum credit score: 600
• Loan amounts: $2,000 to $50,000
• Rates: 5.99% to 29.99% APR
• No