There are many different considerations to think about when you are taking out a loan. Those considerations become a little bit more specialised in circumstances where you might be thinking about taking out a joint loan.
Joint loans are quite common across the UK, and indeed throughout many different countries. Various couples take out forms of joint loans or debts to help them make progress in their life goals. However, although a joint loan can have many benefits, such as ensuring that you should be able to borrow more between you then you would be able to borrow when taking out the loan on your own, it does require careful forethought. After all, when you take out a loan with another person, each of you could be asked to repay the full amount owed if the other person defaults on their payments.
The loans and debts that can be taken out through a joint process may include secured loans such as a mortgage, unsecured personal loans and joint bank accounts that include an overdraft facility.
Several Liability and Joint Liability
You may assume that when you take out a debt or joint loan with someone else, then you will only be responsible for half of the amount owed, or what you consider to be your share. However, the truth is that this is actually not the case. When you sign a contract or credit agreement for an overdraft or loan, or agree to make payments with someone else, then you also agree to pay off the entire debt if the other person will not, or cannot.
Unfortunately, it doesn’t matter who spends the money that you borrowed, or who you believe now owns the items or item that you bought using your overdraft or joint loan, and it doesn’t make a difference whether you are married or in no kind of relationship at all. For instance, if your wife or partner dies then you will still need to make payments on a joint mortgage. Similarly, if you end the relationship with your other half they might end up running up debt on your account with an overdraft facility and you would be left to pay for everything. In other words, whenever you take on a joint debt you are also taking on joint liability and responsibility. If the other person does not make the payments that are required of them, then you could end up with a great deal of debt to manage.
Can You Get a Joint Credit Card?
It’s important to remember that joint loans and debts aren’t necessarily restricted to big things like mortgages. However, in the United Kingdom, you currently will not be able to take out a credit card as a joint account, even if you and your partner both have credit cards. There will always need to be a single person who signs the agreement for the card and is responsible for paying the debt in full.
Though it is possible for the main cardholder with a credit company to let someone else use the credit card on their account, this secondary card holder will not have any responsibility legally to make payments to that card company.
Can Joint Applications Improve Your Chances of Getting Credit?
Applying for a joint loan can sometimes have a negative impact on your chances of getting credit overall. However, you may need to avoid applying together if one of you has a bad credit rating. Once you have taken on a joint loan or debt with another person hen your credit file is connected to theirs. This could mean that if you want to apply for a loan in your own name, the lender will be able to see the other person’s credit history and take that amount into account alongside your own.
Because of the obvious complications that can come to linking your credit history to someone who has bad or poor credit, it’s important to think carefully about how any connection with your partner from a financial perspective may affect your future chances of getting credit or loans in your own name. You might find that it’s best to look into your credit ratings before you think about taking out a joint loan.
In some cases you can end up getting better interest rates and deals on things like mortgages if you simply choose to apply for the credit through your own name, or the name of the partner with the best credit history. Speak to a financial advisor if you need help on figuring out what the best credit solution might be for yourself and your partner. These professionals are often equipped with the skills required to give you an insight into your position within the lending and borrowing market.