6 Features of a Joint Car Finance Application
What is a Joint Car Finance Application?
Joint car finance can help you get accepted for a car loan. Here are a couple of scenarios of how.
- Joint application car finance can be an excellent option for young drivers and students using your parent/guardian’s good credit record to get a finance agreement on a reliable motor. Over time your financial score improves, and next time you can apply on your own.
- Couples struggling to get a decent car can pool their collective incomes and resources with a joint application for car finance.
Your co-applicants ability to be reliable with a good credit rating is crucial. Suppose you’re signing with a partner with a mountain of credit card debt that they’re behind on repaying. You will seriously affect your chances of a good car loan.
This content will answer how joint car finance works, so you can check if it’s right for you!
How does joint car finance work?
Joint car finance applications vary from lender to lender, but you’ll first send over your details. In many cases, the finance company will get in touch for all the info they need about the co-applicant.
With joint car finance, the applicants are usually partners, parents or other family members; there’s no hard and fast rule. In theory, it could be anyone over 18 (depending on the lender’s criteria).
Not all lenders accept joint applications for car finance. Even if they do, the criteria could be significantly different from lender to lender.
For instance, it’s pretty standard for the finance provider to reject a joint car finance application if you and your co-applicant live at different addresses. You’ll have to try a few lenders to find one that fits your circumstances.
Can I Apply for Joint Car Finance?
Yep! Anyone over 18 can apply for joint car finance: but that doesn’t necessarily mean you’ll be accepted.
From the finance providers’ point of view, two heads paying for the same car are better than one. If you’re the sole applicant for car finance, your financial profile must be strong.
However, pairing up with someone, such as a parent, with a better credit score, you’ll increase your chance of being accepted for joint car finance and a favourable interest rate.
Can I Apply for Joint Car Finance with Bad Credit?
Yes, having bad credit is one of the primary reasons people take out joint application car finance—many people struggle to have a solid credit history, including most young drivers.
When you’re young, it’s unlikely you’ll have the time to get a bad credit rating, but you probably won’t have much! In the eyes of lenders, this is still bad.
Making a joint car finance application with someone with a long and detailed positive credit history gives the lender reassurance that they will get their money back.
However, a word of caution is to be careful about making a joint car finance application with someone with a bad credit profile. Both applicants’ credit files are financially linked and could negatively affect you, even if your credit history is good.
Can I Joint Finance a Car with My Child or Partner?
Yes. You can make a joint car finance application with a child or partner, assuming both applicants are 18 or over. A minor can’t sign a finance agreement. The lender will likely require you to live at the same address.
Joint Liability Explained
As mentioned earlier, when you take out joint car finance, you’re not necessarily signing up for a 50/50 split.
Legally speaking, you must pay the entire debt if the other person can’t, and vice versa. The lender doesn’t care who the money comes from – as long as the repayments happen!
Whether you decide to split the loan 50/50 or, for example, can contribute less if the joint car finance is with your parents, it’s ultimately a ‘gentleman’s agreement between the two applicants.
It’s not legally binding, and it’s up to you to make an arrangement that works for you and your co-applicant. So only make a joint application with someone you have a stable and open relationship with and trust.
Lenders use many different terms to discuss financial responsibility. You must be aware of ‘joint’ and ‘several’ liability. A legal obligation doesn’t make a difference in who is driving it more or whether you’re no longer in a relationship.
Joint debt means joint liability. Think hard about that before you sign on the dotted line! Is this someone with you who could potentially have a falling out? That’s why it’s better to use a family member.
Will Both Applicants require a Financial History Check?
So how is your credit score affected when shopping for joint car finance?
Initially, only a soft search happens on both credit reports; these have no impact on your credit scores. If you receive a quote and decide to proceed, only then does a hard search occur; this can affect your credit report.
Much of the decision is about your income. A significant advantage of a joint application for car finance is someone on a low salary, such as a student, might reach the affordability requirements due to the other applicant’s good income.
Of course, if you accept a car joint finance agreement, the lender does a complex search on your and your co-applicant’s credit files. You can’t get car finance without a hard inquiry.
If all goes well and the joint application goes through, you and your co-applicant will be equally responsible for the payment commitments – even if one earns more! That’s why having a good relationship with your co-signer is so essential.
Can Car Finance Under Joint Names Affect my Credit Score?
Taking out car finance in joint names will appear on your financial file. However, it can positively boost your score.
You’ll be financially responsible if you make your monthly payments on time. So crucial for the future when you apply for a personal loan or a mortgage.
Of course, the other side is that your credit score will take a considerable beating if you miss repayments.
What if One of us Can no Longer Afford the Repayments?
Ahh, the nightmare scenario. If you are a joint applicant unable to pay your share of the monthly car finance payments in the future, your co-applicant will be left to pick them up.
You and the other applicant are responsible for the loan repayments. The percentage doesn’t have to be 50/50. It’s up to you. However, at least one of you must make the repayments, or both will be held accountable.
If you get into financial difficulty and struggle to make repayments due to loss of income or another credible reason, it’s always worth reaching out to your lender. Your finance provider wants you to pay the loan back, and they aren’t out to get you.
In many cases, they can offer a payment holiday, where you take a few months off from making your repayments and extend the length of the contract.
Is Joint Finance Available on All Types of Car Finance?
Yes! a joint car finance agreement is typically available on Hire Purchase car deals and a PCP Personal Contract Purchase.
HP Car Finance
A Hire Purchase (HP) car finance deal is one of the most common ways to get a car. You have a repayment schedule to pay the car’s total cost over a specific time – usually three to five years. You’ll have the option to put down a deposit to reduce your monthly outgoings.
You don’t own the motor until you make the final repayment – but after that! You can keep driving it until the wheels come off or sell it. It’s your call.
While you can make a joint car finance application on a Hire Purchase, only one can be the car’s registered keeper despite both owning the motor.
However, both have legal ownership of the car, but the primary user is responsible for taking care of the car, doing things like an MOT, and paying the road tax.
Be sure you and your co-signer are on the same page before taking out a Hire Purchase. Perhaps you want to pay it off, then sell and split the money. It’s up to you!
PCP Car Finance
A Personal Contract Purchase (PCP) car finance deal is more complex than a hire purchase deal.
Crucially, the monthly repayments on a PCP are less – because you only pay off the amount the vehicle will depreciate; you don’t own the car at the end of the term!
You could hand the car back or opt for the ‘balloon payment’ to own the motor outright. The latter is typically a few thousand, and many choose to hand the car back instead.
Typically, PCP take-up is by someone who likes to change their vehicle every few years. You own the motor outright if you opt for the balloon payment. You can only have one person as the car’s registered keeper.
Pros and Cons of Joint Car Finance
- You can get a car finance deal on a newer, more reliable motor than if you applied alone.
- If the co-applicant has a higher income than yours and a decent credit profile, you could get accepted for joint car finance despite a poor or non-existent credit rating.
- You can split the costs for the motor.
- Only one person can be the vehicle’s registered keeper at the end of a joint car finance agreement.
- If one of the applicants misses a payment or loses their job, the other is responsible for paying it.
- You are financially linked to each other, negatively affecting someone’s credit score if you have a poor credit score.
The guarantor route is often favoured, as it gives someone a bit of independence and financial responsibility.
Who is the Owner of a Car on Joint Finance?
The car legally belongs to the lender until final repayment when the ownership passes to both borrowers – so if you sell the motor, you should both get a share of any profits.
Ultimately, there can only be one registered keeper of a motor if you eventually own it outright.
Joint Application vs Guarantor Car Finance
While they may seem somewhat similar in function, a joint application and a guarantor loan are different.
A joint application is simply two people applying for a loan, and both are responsible for making the repayments.
A guarantor loan is on one person, the borrower, assuming they make all the repayments. The guarantor’s task is to create a safety net, but they are legally responsible for the borrower’s debt if unpaid.
FAQs - Joint Car Finance Application
What is a joint applicant for car finance?
A joint car finance application is when you apply for car finance with another person, using your details to support your application.
The lender decides based on both parties' income, debts and credit histories.
Typically, with a car finance application under joint names, both parties must live at the same address.
What documents do I need for car finance?
Finding proof of income can be tricky, depending on your circumstances. In most instances, you need your payslips and bank statements. Still, suppose you're self-employed, for example. In that case, it can be more difficult, as you may have to juggle statements from personal and business bank accounts.
The documentation you'll need depends on your lender and can vary. For example, suppose you have a low credit score. In that case, you might need more information on proof of income to make monthly repayments. If you have had previous driving convictions or bans, you can still get car finance: you might have to reach out to more lenders.
Remember: no car finance provider will ever guarantee the offer of a car loan. However, they want your business and will work hard to try and get you signed up!