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In this bitesize Bamboo article, we focus on the most important thing to consider before taking out a joint loan – loans for couples.
It’s not uncommon for couples to look into taking out a joint loan – loans for couples, in other words – to maximise how much they can borrow and split the responsibilities of the debt.
(Note: you don’t have to be in a relationship to consider taking out a joint loan – loans for couples is just a term that we use because it’s mostly couples who apply. In reality, you can apply with anyone, whether you’re married, in a relationship, living together or just friends.)
However, whatever the reason you’re applying — and with whomever you’re applying — there’s ONE thing you need to remember:
Joint and several liability.
What on earth is joint and several liability? We hear you ask.
Well, once you dig beneath the layer of legal jargon, joint and several liability is the most important condition of joint loans, especially if you and your partner split up or go separate ways, because it means that you’re both responsible for the whole debt.
Now, you might think that when you take out a joint loan or any kind of debt with somebody else that you’ll only be responsible for “your half” of the debt.
Unfortunately, that’s not the case.
The credit agreement you sign when taking out a joint loan – loans for couples, loans for partners, whatever you want to call it — means that you’re both agreeing to pay off the entirety of the debt if the other person can’t (or won’t) pay.
It doesn’t matter who spent the money, who owns the items now or whose idea it was to borrow the money in the first place; if the other person can’t (or won’t) pay, you’re legally obligated to pay that money back.
So, if you’re thinking about taking out a joint loan – loans for couples are a great solution for helping you both get access to better rates or more money. (They’re also great for showing joint finances for VISA applications.)
However, they’re not without their downsides. Taking out a joint loan isn’t a decision that should be taken lightly. If things go south in your relationship, at work or with your finances, one of you could end up having to pay back more debt that you initially realised.
Before you start taking out a joint loan – loans for couples, if you prefer – make sure you’re both in a position to pay off the entirety of the debt before you commit.
In fact, the best thing you can do before making a decision is to have a good talk about money. But, we know that isn’t easy. As a nation, we’re awful at talking about money.
For more advice on borrowing and planning your finances, don’t forget to check out the other posts on our blog!
- Author The Bamboo Team
- Posted 17 May 2019