Should married couple have collective credit to consolidate debt, particularly if one of them has a low credit score? Applying jointly for a loan can increase the chances of being approved.
However, the right response will vary depending on the type of debt you are consolidating and your motivation. Crixeo website can also compare Credit9 reviews to throw some light on this issue.
There are a few advantages to applying together for any debt consolidation loan.
- You can use the second spouse’s income to increase this lending factor if one spouse has a debt-to-income ratio that is too high.
- Similar to the previous situation, if one partner has poor credit, the application may still be approved based on the qualifications of the cosigning spouse or second co-applicant.
- You can be eligible for a loan with a lower interest rate than the spouse with high debt if you strengthen the quality of your application and general creditworthiness.
- A shared application has the advantage of allowing you to borrow more money.
However, the drawback is that because you are co-borrowers, you are both legally responsible for repaying the loan.
However, a shared debt results in a responsibility that is “joint and several.” 100% of the loan must be repaid by both parties. A few other issues are as follows:
- Credit score issues
Risk management is a line of business for lenders. A decent credit score is required for at least one applicant in order to be eligible for a low-rate consolidation loan. You are counting on one spouse’s good credit history to take precedence over the other’s poor record.
Making a joint application, though, implies that your credit score will now be impacted by the loans that were previously impacting your spouse.
- Marital breakdown
If you have a written loan arrangement, you have joint debt, which entails responsibility and liability. Whoever promises to repay the loan is irrelevant.
The lender will seek to you for payment if you divorce or separate from your spouse and they cease making payments.
- Marital property and assets
Whether you want to put any family assets at risk in order to consolidate unsecured debt like credit card debt is another thing to think about.
If you are fortunate enough to own a home, you may think that consolidating one spouse’s problem debt with a home equity loan or home equity line of credit is a good idea.
- Income stability
An unexpected loss of employment or drop in income is one of the most frequent causes for people to file for bankruptcy or submit a consumer proposal.
When you consolidate debts with your spouse, you become jointly accountable. You might not have enough money if one partner loses their job to make your debt consolidation payments.
- Student debt
Many millennials are starting their married years already in debt because of the growing problem of student loan debt.
It might make more sense for one spouse to look into student loan relief options rather than subjecting the two of you to continued loan repayment if they haven’t been able to produce enough money to pay off their student loans.
Whatever decision that you make, you must be fully aware of the both side of the coin.