How does joint car finance work?
Applying for joint car finance is similar to getting personal finance; you borrow some money to buy a car, and pay the loan back over time. The critical difference is that two people are responsible for the debt and, therefore, the repayments. The second borrower is usually a family member or close friend of the first person. Most often, it is a spouse, but you can also borrow with a parent, sibling, or friend.
Joint finance is a term that also applies to a loan with more than two people responsible for it. All co-borrowers take equal responsibility for the entire loan. Therefore, if one of the borrowers can't contribute their share of repayments, the other borrowers are responsible for those repayments.
The most common example of joint finance is when a couple has a mortgage together, and both pay off the loan. Many people don't realise that you can also get a joint car loan that functions in the same way. However, getting joint finance for vehicles and other expenses is becoming more and more common as people realise what a great option it is. After all, if a couple shares a car, why should only one be responsible for the debt?
Why apply for joint car finance?
Borrow More
With two incomes considered in the application, applying for car finance with someone else can mean you'll be able to borrow more money. Income is one consideration for finance companies when deciding how much we can loan to you, as we want to make sure that it's feasible for you to pay back the loan.
Get Approved
As two people usually earn more than just one, this can help those with low income get approved. If your income isn't high enough to get approved on your own, you may be able to gain approval by applying alongside someone else.
Have a Back-up
If unforeseen circumstances affect your income or partner's income, having a joint loan means that the other person will need to cover repayments for you. This offers additional security as you know you won't lose your vehicle if your situation changes, as long as the co-borrower can cover the full repayments.
Other Considerations
Choosing who you might apply for finance with is an important decision. If this person defaults on their payments, you will be responsible for repaying the total amount of the loan. If you and your partner already have joint bank accounts, then it could make sense to take out a loan together.
Consider who of your friends or family you'd trust enough to take out a loan with. If you're not sure that a person's financial situation is stable enough, maybe consider choosing someone else.
