Taking out a joint loan: what you need to know

Money Advice Service

Many couples take out a joint debt or loan. As a couple, you might be able to borrow more money. But it’s a serious step because each of you could be asked to repay the full debt if the other person can’t.

What types of loans and debt can be taken out jointly?

Several different types of loans and debt that can be taken out jointly, including:

  • secured loans – such as a mortgage
  • joint bank accounts that have an overdraft facility
  • unsecured loans – such as a personal loan from a bank or other lender

Joint and several liability explained

Top tip

Most joint bank accounts are set up so that one person can spend money without the others’ permission. But you can set up an account so that all of you have to agree before any money can be taken from the account.

You might think that when you take out a joint loan or debt with someone else that you’re only responsible for your ‘half’ or share, but that’s not the case.

By signing a credit agreement (a contract) for a loan or overdraft with someone else, you’re each agreeing to pay off the whole debt if the other(s) can’t – or won’t pay.

This is ‘joint and several liability’.

It doesn’t matter who spent the money, or who now owns the item or items you bought with the joint loan or overdraft.

And it doesn’t make a difference whether you’re married, in a civil partnership or even if you’re not in a relationship at all.

For example:

  • If your husband, wife or partner dies, you will still need to repay any joint mortgage.
  • If you break up with your boyfriend or girlfriend, they could still run up a debt on a joint bank account if there’s an overdraft facility, leaving you with the total bill.

In other words, any joint debts mean joint responsibility and liability

So if the other person doesn’t pay up, you could end up with a lot of debt on your hands

Follow the links below for more information:

What about credit cards – can they be taken out jointly?

In the UK, credit cards can’t be taken out jointly, even if you and your partner each have a card.

There’s always one person – the main cardholder, who’s signed the agreement.

This means they’re responsible for paying off the debt in full.

But the main cardholder might let someone else have a credit card on the same account.

This secondary cardholder doesn’t have a legal responsibility to make any payments to the credit card company.

Can a joint application improve your chances of getting credit?

Applying jointly for a loan can sometimes increase your chances of getting credit.

However, you should definitely avoid applying together if one of you has a poor credit rating.

Once you have a joint debt with someone, your credit file will be linked to theirs.

This means that if you want to apply for a loan in your own name in the future, the lender would be able to see the other person’s credit history and take that into account as well as your own.

It’s a good idea for both of you to check your credit rating before taking out any joint credit.

This article is provided by the Money Advice Service.

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