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What is a Joint Auto Loan?

A joint auto loan is a loan where two people are responsible for the repayment of that loan. Since two people are named on the loan, both will receive the benefits of on-time payments. On the other hand, both people will suffer the ill effects of not repaying the loan responsibly.

Why Might a Joint Loan Be Necessary?

There are many reasons that a joint loan may be necessary. Among those, two are most common: 

  1. The primary borrower may have a good credit score, but insufficient income.
  2. The primary borrower may have sufficient income, but a low credit score.

Meeting Lender Requirements:  Two Applicants Better than One?

Most lenders require a monthly income of at least $1,400, a credit score above 680, and a low debt to income ratio. If a potential borrower does not meet all of those requirements a co-signer or joint applicant may be required. When a joint applicant is involved, the income of both people is considered along with the total debt to income ratio. The loan will then be considered based on the highest credit score of the joint applicants and an interest rate will be assigned based on that score. This may lead to a lower rate of interest and better lending terms if either of the above two scenarios is the case. That said, it is important to note that both applicants are equally responsible for repayment. If the two applicants are not spouses, then it’s typical for one borrower or the other to be reponsible for the payments. If that person fails to make payments on time, the second borrower will be held liable for the remaining loan balance.  This can lead to a strained relationship, so it is important to consider the decision carefully before entering into such an agreement.

A joint loan is very similar to a co-signed loan. In fact, many lenders will use the terms interchangeably.

About the Author

The author has many years of experience in automotive finance and insurance. However, each consumer's situation is unique. It is best to contact a finance specialist for further assistance.
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