How Does Joint Car Finance Work in Ireland?

A joint loan is similar to other secured and unsecured loans, with the only difference being that the loan involves co-borrowers who will be partly and entirely responsible for the settlement. In order to qualify for a joint loan, there must be at least two borrowers, and they will all have to undergo a complete affordability check, which includes a thorough assessment of their income sources and credit reports.

A joint loan is a general term. It is not a specific loan product aimed at a specific purpose. It might be a mortgage or a car loan. When there are two or more aspirants involved in a mortgage or a car loan application, they are addressed as joint loans. Co-borrowing is particularly eminent among couples, when one of them has an abysmal credit rating, because by this they combine their financial sources and credit scores to dramatically mushroom their chances of approbation.

Joint car finance

Joint loans, in particular, are sought-after to own a house and a car. Joint car finance works the same way as any other joint loan. Despite a respectable size of savings, many borrowers find it a burdensome task to be perceived as a credible borrower, and it is partly because their credit scores are not up to scratch.

While most loans, especially emergency loans, entail less strict approval criteria, car loans require an impressive credit report. The absence of a stellar credit rating results in diminished approval chances. To enrich your overall credit profile, you may consider applying with your significant other.

However, only if your spouse has an admirable credit history will co-borrowing work to your advantage. If you do not have a partner, another family member or a friend can act as a co-applicant. Bear in mind that the ownership of the purchased car will be shared jointly by all involved money recipients, as well as the loan obligation.

How does joint car finance work?

Personal details of both borrowers, such as their names, addresses, and the like, will be collected through an application form. It is likely that the application form comprises extensive financial details such as:

• How much you earn
• Estimated monthly expenses
• The number of dependents
• Any additional income source
• The number of breadwinners

Not all lenders run such a comprehensive application form, but they all will peruse your credit report, bank statement and other acceptance factors. A lender is also obligated to determine individual repaying capacity in case the other applicant refuses to repay the loan.

If one of you fails to meet the obligation, the lender will call you on to repay the whole of the debt. It is worth noting that default by any one of you will have an adverse impact on the credit rating of you. Once your credit file is impaired, your chances of qualifying for a loan at affordable interest rates down the road are negligible.  

The approval criteria vary by lender. For instance, some lenders will accept your application when the value of the purchased car is not more than €35,000, while others will be indisposed to sign off when the purchased price goes beyond €30,000. Joint car finance for bad credit in Ireland is subject to high interest rates even though your partner’s credit report is up to snuff. Most lenders attach strings to the number of miles covered as well as the age of your car by the end of the agreement.

You will have to acquire all these details by contacting a lender. Borrowers are enjoined in applying for pre-qualifying letters from different lenders to gain insight into likely proposed interest rates, annual rates, and conditions pertaining to mileage.

Risks related to joint car finance

You cannot throw caution to the wind at the time of taking out joint car finance. Not only are they subject to high interest rates, but they are also linked to other drawbacks. You need to assimilate prevailing risks.

• Your borrowing capacity will be affected

Both applicants are expected to meet the obligation. If one of you refuses to repay the debt, the burden of payment will be transferred to the other. The consequences will be borne by both borrowers. In the future, when you apply for a loan, you will struggle to make payments.

• The impact of financial link

Linking your account to someone whose credit report is not perfect will impair your credit rating. Your credibility will be called into question when you apply for a loan later.

• The risk of default is very high

Do not forget that you are obligated to pay the full amount of the debt. Chances are your partner fails to adhere to the repayment plan, and your financial circumstances have turned upside down, too. Of course, it will be onerous to stick to payments. Late payment fees will dramatically increase the total size of the debt, and soon, you will find yourself in an abyss of debt.

What should you do to improve the approval chances for car finance?

A joint application should be the last resort. First, you should figure out ways to ameliorate your credit rating. The following are some of the ways:

• You should keep paying all your bills on time. Any outstanding debt will make it worse.
• Make sure you do not have any debt such as loans for bad credit in Ireland at the time of using car finance.
• Utilise credit cards responsibly to avoid any questions being raised about your financial comportment.

The final word

Joint car finance can be quite challenging to get the nod for. Even if one of the applicants has good credit behaviour, high interest rates and annual rates will be charged. You should carefully diagnose the implied damaging effects of these loans on your credit score and financial situation before putting in the loan application.