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The Power of Two; Why Joint Loans Can Be Cheape
Sometimes when you’re looking for the right type of finance, having the power of two people can make a whole world of difference. Not only can you strengthen your position to a lender, but you can potentially borrow a higher amount if needed. With it reported 2019 ended in a strong Q4 position to boost many American’s financial statuses, it could be a great time to start looking at loan offers that could benefit you. But what are the options to look at and why are joint loans potentially a cheaper option to consider.
Having a second named applicant on any loan application, whether for secured borrowing or unsecured loans, can have a positive effect on the outcome. The biggest reason this happens is because of the reduced risk to the lender. If say you were a mortgage lender and received an application for $400,000 from an applicant with a fair credit rating, wouldn’t it be better if a second person with a good or excellent credit score was a joint applicant? The answer is probably yes, as having a second person with a stronger credit score will help to guarantee those payments will be met each month.
Not only does this present a lower risk to the lender, but it can also mean as borrowers you can take advantage of a lower rate of interest and cheaper repayments overall. With joint loans, you’ll be able to save much more on your monthly and yearly outgoings, whether you have a personal loan, guarantor loan or home loan. In some instances, you can have more than one applicant attached the loan agreement, depending on the lender, enabling you to guarantee the borrowing you want even further.
Lower Interest & Tax Benefits
As you will have more than just yourself on the application, you can ensure that a lender will not only need to check your credit rating but that of the joint applicant. Now, depending on the current status of you and your joint applicants’ credit rating, you may be able to get lower interest rates and tax benefits. For the latter, this is more applicable for a joint home loan where both applicants would also need to be joint owners of the property the loan is for. The tax benefits can involve a rebate of home loan interest and registration charges if successful. The reason both of you would need to be named on the loan and the property is because if one is missing, it will affect your eligibility.
Interest rates on joint loans can vary between lenders and you should consider your options before signing any agreement. Ideally, you want something at a competitive rate and there are various online tools you can use to check this. You shouldn’t go for the first offer that you see, as although it may seem to be a great deal, you may have overlooked other better rates. This is where it is best to look at comparison tools as you will be able to gain a full overview of the market rates and ensure you’re not being overcharged.
What You Need to Consider
With a joint loan comes a few things you need to consider fully before proceeding. If you can get the best rates and your chosen joint applicant has a good credit rating, you’ll be able to take advantage of the very best deals available. If both you and your joint applicant have fair credit or one of you has a low credit rating, you will find this will affect how much you can borrow. This will also affect how much interest you will be charged in the long term as you will want to ensure the product you go for is in your best interests. If the joint loan works out to be too high in interest and monthly repayments, you should reconsider your options.
Check Your Affordability
Before you venture into any joint loan agreement, both you and your joint applicant will need to ensure you can afford it. It may seem an obvious thing to point out, but applying for something you cannot afford to pay should be avoided. The only way you’ll be able to check your affordability is by spending the time in going through your finances and working out exactly your income and outgoings per month. If it shows anything less than a comfortable disposable income, you should re-evaluate the decision to apply for a joint loan. This is especially important for a joint secured loan for a home as if repayments become a difficulty, you could end up seeing your property being put at risk. With taking everything into consideration, you and your joint applicant can benefit from the many positives a joint loan can bring.
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