In this modern period, many couples are taking out joint loans. While you can freely borrow a joint personal loan, it’s a serious step. What if one partner bails out of the loan before its maturity? Then you’re left with a loan that’s racking interest over time! Keep in mind that a join loan is a ‘joint responsibility’ that must be taken with utter seriousness.
Check out these important factors about joint loans:
The Joint Loan Process
By signing a loan agreement with someone else, you’re each agreeing to pay off the whole debt if the other can’t settle. This is ‘joint and several liability’, and you probably heard about the co-maker/co-guarantor policy. It doesn’t matter who spent the money, or who now owns the item or items you bought with the joint loan or overdraft. Take note that it doesn’t make a difference whether you’re married, in a civil partnership or even if you’re not in a relationship at all.
For example: If your husband, wife or partner dies, you will still need to repay any joint loan. If you break up with your boyfriend or girlfriend, the debt will still remain under your name. Collectors might approach you or your guarantor, depending on who they can reach first. So if the other person doesn’t pay up, you could end up with a lot of debt on your hands.
Credit Card Policy
While companies are strict, you and your partner can still take out a credit card. Upon doing that, both of you can still take separate cards as well. The main cardholder will usually sign the agreement. This means that he/she is responsible for paying the debt in full, but this doesn’t take the burden off your shoulders. Creditors will still hound you, and they will still demand specific amounts. It’s advisable that you pick the credit card wisely. Some cards have high monthly rates and can greatly pin you down.
All About Credit Boost
Applying jointly for a loan can sometimes boost your credit score. However, you should definitely avoid applying together if one of you has a poor credit rating. The poor credit score will drag down a guarantor’s own score, thus affecting the overall value of the loan. Once you have a joint debt with someone, your credit file will be linked to theirs. This means that if you want to apply for a loan in your own name in the future, the lender would be able to see the other person’s credit history and take that into account as well as your own. It’s a good idea for both of you to check your credit rating before taking out any joint credit.
Joint loans are great options if you’re starting out a life with someone or you’re planning for a project. Just make sure that you have a strong relationship with your co-guarantor. Trust is very important here because money is at risk.