Being two holders to request a credit has great advantages. Having two monthly incomes increases our chances that the credit will be approved and also gives us greater bargaining power to achieve better financing conditions. However, when applying for couple loans we are also taking some risks which we should discuss with our spouses before committing to go into debt to avoid possible future discussions. We tell you the three fundamental questions that we must answer before contracting a loan between the two.
Who will pay the personal loan?
The most common is that as both owners, the fee is divided 50% between the two or is paid with the couple’s common money. However, according to the particular organization of each couple, sometimes it is only one who is responsible for paying the credit.
Although in the eyes of the bank we are both fully responsible for the repayment of the credit, if we are not going to divide the payment equally between the two , it is important to make a document detailing this agreement between us .
In addition, we should also specify what the procedure will be if one of the two becomes unemployed and cannot cope with the payment of his part of the monthly payment and if he will have to return the money that he has not paid when his employment situation is regularized.
Who will use the financed good?
This question is especially important when it comes to a physical asset such as a car and not so much when it comes to a reform, something more intangible and that both will enjoy. Who will use the vehicle? In whose name will it be? Clarifying these doubts and leaving them in writing will always be important, but especially if the person who pays the credit and who uses the financed product or who owns it is not the same person.
What happens to the credit if we split up?
This is undoubtedly the most awkward of questions , but also the most necessary. In the event of a breakdown, it is important to have a pre-agreement on what will happen to the financed asset and the remaining capital to be returned from the loan.
There are different alternatives that we can take advantage of that can be adapted more or less according to our situation and that we must assess:
- Return the loan and cancel it : it is the easiest option. Without a loan, there are no problems. However, we will have to define whether the financed asset would be sold to return what remains and who would keep the money in the event that the quotas were not paid equally.
- Sharing the loan as before : it is the simplest option in terms of paperwork, but also the most risky. In this case, we must have a lot of confidence in our ex-partner, since both of them will have to continue paying as before.
- Change the credit to a single holder : with this option the dispute would be settled. It consists of going to the bank and making a contract change so that only one owner remains. Although here we will have to define who will keep the well financed and if the other part of the couple would get the money paid in the loan back.
Although these are uncomfortable questions to ask our partner, asking them will allow us to avoid possible misunderstandings or financial discussions.