My partner and I are considering a joint loan, is it wise?
May 21, 2019
When taking out a joint loan, there are many things you need to consider. Signing up to a joint credit agreement is a huge commitment and it’s important to ensure you have all the facts before signing on the dotted line. While no one wants to think about a relationship breaking down, the truth is that you could be left seriously out of pocket if things turn sour.
A recent survey from the Debt Advisory Centre Scotland (DACS) revealed that one in six borrowers who applies for and takes out a joint loan with their partner are unaware of the full implications, should they default on payments. One in ten respondents thought that they were only responsible for half of the loan, and 2% of respondents believed the proportion of repayment depended on their annual income.
When taking out any joint credit agreement, it’s important to be aware that if for any reason your partner is unable or unwilling to make repayments, you could be left to repay the loan on your own. A couple will often take out a larger loan that, as an individual, you would not be able to afford to repay.
It’s too easy to believe that these kinds of problems will never occur when taking out a loan and it seems the natural thing to do as a couple. But according to figures from the DACS, one in every ten people who seek help, do so due to the break-up of a relationship which has left them unable to repay their debts.
Although applying for a joint loan can be risky if you’re unprepared, it’s often a necessary and unavoidable part of life. Obtaining a joint mortgage will allow you a higher property budget, and it’s often easier to obtain credit by applying as a couple (provided you both have a reasonable credit rating).
If one person has a poor credit rating though, it’s wise to avoid applying for credit together. Linking yourself to your partner with a joint loan will also link your credit files, and you could be penalised for your partner’s poor credit when applying in the future. If you’re unsure of how your credit rating stands, make sure you both do an online check before applying, as simply being refused credit can reflect badly on your credit score.
If you’re struggling with debt as a result of a relationship breakdown or need advice on other options to keep your debts from spiralling out of control, why not contact our knowledgeable advisers at Scotland Debt Solutions. Our team of experts can provide impartial advice on the most suitable way to manage your finances and, if necessary, point you in the direction of a debt management plan to suit you. So if you’re looking for a joint loan to pay off existing debts, contact Scotland Debt Solutions for expert advice before making any decisions.
If you’re looking to save some money it’s a good idea to make a detailed budget that lets you see where your cash is currently being spent, and offers an overall view of your finances. You’ll need to collect together your income and expenditure details, including annual costs such as insurance, car expenses, birthdays and […]
A trust deed is a common debt repayment programme based around a voluntary arrangement made between you, your creditors and a qualified independent trustee who takes control of your debt repayments for a typical period of four years. If you’re having difficulty paying your debts and have assets or a regular income, you may qualify […]
If you have built up debt from gambling, you may be able to write off part or all of the debt via a formal Scottish insolvency route. Not all insolvency solutions allow debts to be written off, but you may be eligible for a trust deed if you meet certain criteria, with sequestration also being a possibility […]
Her Majesty’s Revenues and Customs (HMRC) is one of the biggest creditors in Scotland, and indeed across the rest of the UK. Millions of people make payments to the government through HMRC in the form of income taxes, National Insurance and VAT every year. For the majority of people in employment, this is done automatically […]
Council tax is a charge levied on residential property and payable to the local council. While some properties are exempt from paying council tax, most households must factor this bill into their monthly budget. Households will be given a yearly charge which can then be broken down into a series of monthly instalments throughout the […]