Borrowing together can make sense for borrowers who have concerns that they will not get a loan approval on their own. For example, if you have a low income or cannot meet other bank requirements, it is worthwhile to involve your partner in order to take out a loan for two. For a bank, borrowing together is more secure – the more people are responsible for the repayment, the lower the risk of default.
Requirements for the second borrower
The statistics indicate that around 20% of all loans are applied for as a couple, which is also normal for couples who are planning something bigger and want to pay for it together. In the case of a joint loan request, at least one of the two borrowers should meet the following requirements of a bank:
- Permanent residence in Germany
- permanent employment
- Positive credit bureau information
- Sufficient income
The second person does not necessarily have to be a relative or spouse. In principle, everyone can be the second borrower who fulfills the acceptance criteria of the bank and is ready for borrowing “in pairs”. However, the first borrower is always the one who proves the higher income.
Benefits with a second borrower
First, another borrower with a secure income brings a bank to better prospects by increasing the repayment ability of the first applicant. For example, students or consumers with fixed-term contracts can significantly increase their chances of getting a loan. With joint borrowing, the partners can even expect higher loan amounts.
Second, if both partners have their own income, they are increasing their creditworthiness, which is determined by a bank when the loan request is made. The higher the credit rating of the two applicants, the cheaper the interest rates that can ultimately be obtained when borrowing.
What are the risks?
If a joint loan is taken out, the two borrowers are fully liable and are two responsible debtors. If a borrower then becomes insolvent, the bank can claim the entire remaining debt from the other borrower. Furthermore, the credit bureau data of the two people are checked and the approved loan is saved in files by both consumers.
Even if a couple divorces, the former spouses are still jointly and severally liable to the bank.
Conclusion: In general, joint borrowing is cheaper than a single application. However, before borrowing, the advantages and disadvantages of a “two-person” loan should be examined and the private life situation should be carefully considered.