In the course of living together, numerous couples will at some point or the other take out a joint loan or enter into some kind of shared debt. The main advantage with this is the fact that between the two individuals, they may be able to obtain a larger amount of money. It however goes without saying that this is a big undertaking given that if one of the debtors fails to meet his / her end of the bargain, the remaining one is forced to singlehandedly foot the entire bill.
Firstly it pays to know the types of loan facilities that are available to couples or can be taken out jointly. A popular one is a secured loan, for example, mortgages. Unsecured loans like personal loans are also available for this category. Finally people may opt for joint bank accounts where an overdraft offer is available.
When it comes to joint bank accounts, the most important consideration is to think about whether you would like it set up in such a way that one account holder can make use of the funds without the other’s permission or knowledge. It is usually wise to have a co – signing agreement in which both signatories need to approve any transaction. This way, you are able to keep your expenditure in control and prevent your debt figures from spiraling out of control.
When cosigning on a loan, make sure that you have made a thorough assessment of each other’s ability to pay off the debt. As already mentioned, defaulting by one signatory means the other has to foot the full bill. In essence it is best that at least one signatory has the financial capacity to cover the whole loan amount. The ideal situation is that both signatories are able to pay off the loan, alone but would rather take advantage of the lesser repayment amounts that come with taking the loan out jointly.
The last thing to keep in mind, in order to maintain a healthy joint credit profile is to be honest and upfront with your partner or co – signee. Both parties should meticulously maintain receipts and statements related to the loan. Make it a habit to come together and compare these documents on a regular basis so that there are no nasty surprises which could end up being toxic to the relationship.