Joint Credit

Written By
Paul Tracy
Updated August 5, 2020

What is Joint Credit?

Joint credit is credit extended by a lender to two or more parties. Loans secured from joint credit are the responsibility of all parties.

How Does Joint Credit Work?

Two or more parties may apply for joint credit with a lender. The lender grants credit to all the applicants on the basis of their combined credit ratings, incomes and outstanding assets. Once the lender approves joint credit, all parties are responsible for repaying interest and principal on loans withdrawn using this credit.

To illustrate, suppose a bank approves Bob and Jane for joint credit up to $20,000. If Bob and Jane borrow money -- separately or together -- using the $20,000 available to them, both are liable for repaying the principal and interest on the outstanding debt.

Why Does Joint Credit Matter?

Joint credit is frequently used by married couples. However, it may also be granted to two unrelated individuals. Joint credit allows for larger credit extensions than most individuals would be able to secure otherwise. Given the joint liability involved, joint credit applicants must be certain that they trust their co-applicant(s).