When you’re taking out a loan by yourself, there are plenty of unique concerns to think about. For instance, you need to consider how much money you really need access to during the time that you’re taking out the loan. On top of that you’ll need to think carefully about which kinds of loan might be the most beneficial to your unique needs.
Of course, if you’re thinking of taking a loan out with someone else, that also presents a few specific issues that you’ll need to address too. Joint loans are pretty common in the UK today as more couples consider the opportunity to borrow money and pay it back as a team. There are various types of joint loans that you can use to make important decisions and changes in your life, from a joint loan on a mortgage, to taking out a loan together for a car.
The important thing to remember, as with any kind of loan, is that you need to carefully consider the dangers and risks that you face when you consider joint loans in the first place.
What Does Joint Liability Mean?
A lot of people assume that when they take out a joint loan with someone else they’ll only be responsible for their share of that loan. For instance, if you borrowed ten thousand pounds between you and your partner for a new car, you might think that your liability only extends to the five thousand that was given to you. However, the truth is that joint liability means whenever you sign a credit agreement for a joint loan, you’re agreeing to pay off the entire debt, whether the other person gives their share or not.
This means that no matter who spends the money that was borrowed, or who you think should be paying off the loan, the fact that you were involved in the process to begin with means that you won’t have a choice on paying back what is owed. Crucially, it doesn’t matter whether or not you and your partner were married at the time of taking out the loan, or whether you end up breaking up. This is a very dangerous issue that needs to be considered with care when you are thinking about the potential of joint loans. After all, if you took out an overdraft with a person and then broke up, that other person could run up some serious debt on your account that you are liable to pay for.
Are you More Likely to Get Credit with a Joint Loan
The answer to this question is a little complicated. After all, while some people will find that applying for a joint loan will end up giving them a better outcome than applying for credit separately, others will find that the chances of getting a loan decrease when they attempt to apply for finance with another person.
Usually, it’s a good idea to avoid applying for a joint loan if one person in the partnership has a bad credit rating. After all, once you have taken on a joint debt with another person, you will find that your credit file becomes connected to theirs. This means that if you want to apply for a loan at a later time in your own name the lender you go to will be able to see the credit history of the other person and examine it alongside your own.
Because of the problems that come with linking your credit history to someone with bad credit, it’s crucial to think about how financial connections with your partner could impact the possibility that you will be able to apply for finance in the future. Particularly if you are concerned that you might not be with your partner forever. Sometimes, it’s crucial to look closely at the credit ratings of both you and your partner before you even start considering the possibility of a joint loan so you can determine how good your chances would be.
Of course, a joint loan isn’t always a bad thing. Sometimes you might be able to get better deals and interest rates on things like mortgages if you want to apply for your finance solution through a joint account. Other times, it will simply be much easier and more financially viable to apply for the money that you need in your name, without any connection to your partner at all. Remember, even if you apply for a joint loan separately to your partner in order to pay for a mortgage or a car, that doesn’t mean that both of you still can’t use the item that is purchased together. It simply means that you will be taking on the liability of the loan yourself.