If you want to borrow a large amount of cash but need to prove additional household income, your spouse may be able to help. You cannot simply list a spouse’s income with, or instead of, your own if you apply in your name alone. However, you can list their income if your spouse agrees to become a “co-borrower” on the loan.
It’s possible to use your spouse’s income on a loan application, but only under strict circumstances. We’ll review the steps you should take to help you get approved.
What Is a Personal Loan?
A personal loan is a type of installment loan that is paid back with interest in equal monthly payments over a term of up to seven years. Personal loan interest rates tend to be lower than for credit cards, making them a popular option for consumers who need to borrow a large amount. Common uses for personal loans include major home or car repairs, medical bills, and debt consolidation.
There are different types of personal loans. Unsecured personal loans are the most common. These are not backed by collateral, such as your car or home.
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Checking Your Credit
Before you decide whether to include your spouse’s income, gather this information to assess your own financial standing.
Lenders will look at your full credit history to evaluate your creditworthiness, so it’s smart to review your credit report before applying for a loan. You can request a free credit report from each of the three major credit bureaus — Equifax, Experian, and TransUnion — once a year through AnnualCreditReport.com.
When you receive your report, review it closely and make a note of any incorrect information. If you see any mistakes or outdated information (more than seven years old), you can file a dispute with the credit bureau(s) reporting the error.
If you have a limited or no credit history, consider taking some time to improve your credit before applying for a loan.
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Next, take a look at your credit score. You can find your credit score for free from Experian, or you can ask your bank or credit card company. The minimum credit score requirement for a personal loan varies from lender to lender. Broadly speaking, many lenders consider a score of 670 or above to indicate solid creditworthiness.
While there are personal loan products on the market designed for applicants with bad credit, they typically come with higher interest rates. If you are less than thrilled with your credit score, you can take steps to improve it.
Debt-to-Income Ratio (DTI)
Your debt-to-income ratio (DTI) is the amount of debt you have in relation to your income, expressed as a percentage. Ideally, your DTI should be no more than 36%. Lenders prefer that no more than 28% of your debt be housing related (rent or mortgage). If your DTI is too high, you have two options: pay down your debt, or increase your income.
Shop Around Online
Shop around with online lenders to compare the interest rates and monthly payments you’re offered with your income alone. When you’re comparing lenders, keep an eye out for any hidden fees, such as origination fees, prepayment penalties, and late fees. A personal loan calculator shows exactly how much interest you can save by paying off your existing loan or credit card with a new personal loan.
Now that you have a firm grasp of your financial standing, you can assess whether you need to include your partner’s income as part of your application.
Using Your Spouse’s Income
First, the bad news. You cannot simply use your spouse’s income or your combined household income, even with their permission, when applying for a personal loan in your own name.
Now for the good news. If your partner has a strong credit history and income, they can become a secondary “co-borrower” on the loan. A co-borrower can help improve your chances of approval, along with the interest rates and terms you’re offered.
What Is a Co-borrower?
A co-borrower applies for the loan alongside you. Both of your financial information is taken into consideration, and both of you are responsible for paying back the loan and its interest.
Let’s look at the pros and cons of this arrangement.
Pros of Using a Co-borrower
Because co-borrowers have equal rights, the arrangement is well-suited for people who already have joint finances or own assets together. Using a co-borrower allows you to present a higher total income than you can alone. A higher income signals to lenders that it’s more likely you’ll be able to make the monthly loan payments.
Plus, if you manage your loan well, both your credit histories will get a boost over time.
Cons of Using a Co-borrower
Each borrower is equally responsible for repayment over the entire life of the loan. If the primary borrower cannot make the payments, that could negatively impact the credit score of both parties. It’s important to have confidence in a co-borrower’s ability to repay the loan.
The loan will appear on both of your credit reports as a debt, which can affect the ability of one or both of you to get approved for another loan down the line.
Co-borrowers also have equal ownership rights to the loan funds or what the loan funds purchased, so trust is a big factor in choosing a co-borrower.
Applying for a Personal Loan with a Co-borrower
The basic process of applying for a loan is the same no matter the number of applicants. The lender will likely ask both of you to provide certain information up front:
• Personal info: Photo IDs, Social Security numbers, dates of birth
• Proof of employment, and your employment histories
• Proof of income
The lender will then run a hard inquiry of your credit report, which might ding your credit score by a few points. Depending on the complexity of your application, you can expect to get your personal loan approved in one to ten days.
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You cannot simply list your partner’s income along with, or instead of, your own when applying for a personal loan in your own name. However, if your spouse agrees to become a co-borrower on the loan, both your incomes and credit histories will be considered. This can increase your chances of getting approved, qualify you for a larger loan, or give you access to lower interest rates and loan terms. The catch is that both parties have equal responsibility for paying back the loan, and any late or missed payments can negatively affect both your credit scores.
If you’ve explored your options and decided that a personal loan is right for you, it’s wise to shop around to find the right loan. Consider personal loans from SoFi, which offers loans of up to $100,000 with no fees. Borrowers may receive funding as quickly as the same day it is approved.
Can my wife use my income for a personal loan?
Your wife can use your income for a personal loan only if you agree to become a co-borrower on the loan application. That gives you equal ownership of the funds, but also equal responsibility for paying back the loan. How your wife manages her loan payments can affect both your credit scores — for better or worse.
Can you use someone else’s income for a loan?
You can use someone else’s income for a loan only if they agree to become a co-borrower on the loan. That gives them equal ownership of the funds, and also equal responsibility for paying back the loan. This is a common arrangement between spouses, and between a parent and child.
Can a stay-at-home parent get a personal loan?
A stay-at-home parent with a strong credit history may get a personal loan if they can provide proof of income to show they can make the payments. Without income or strong credit history, they may need to find a co-borrower. A co-borrowers credit and income can be used to help the primary borrower qualify for a loan, or access better interest rates and loan terms. However, a co-borrower will have equal ownership of the funds, and equal responsibility for repaying the loan. Using a spouse or parent as a co-borrower is a common arrangement when a stay-at-home parent cannot qualify on their own.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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