Whether you’re planning a wedding or simply moving in together, at some point couples that share a home must discuss money. And while money matters may be a touchy subject, it’s important to address them early on - especially when it comes to borrowing money together.
While the decision to get joint credit is a personal one, learning everything you can about getting joint credit will help you and your new partner make the best financial decision for your family.
What to know about joint credit applications
If you choose to borrow money with another person, you’ll need to complete a joint credit application. Each of you must provide information about your other debts and obligations, your income, and agree to a credit check. If you haven’t been completely honest with your partner about your credit, he or she could be in for a surprise when your advisor reviews your joint application with both of you, so it’s best to discuss any potential credit issues before applying.
Your rights and obligations when you have joint credit
Whether you and your new love are getting a joint credit card, credit line, loan or mortgage, in Canada joint borrowers each have individual rights and obligations.
Each borrower has the right to receive information summarizing interest rates and costs associated with the money borrowed, plus the same statements the other borrower regularly receives. This ensures each of you sees all payment and borrowing activity on the accounts.
Joint borrowers share responsibility for repaying joint credit such as credit cards, credit lines, loans and mortgages, so make sure you both have a clear understanding of who will make the payments and how. Late payments will have a negative impact on both of your credit reports.
For more legal information on joint credit in Canada visit the Financial Consumer Agency of Canada’s Manage Your Money As A Couple webpage.
Getting a joint credit card or credit line account
A shared home comes with shared expenses -- such as groceries. Many couples pay for these expenses with individual or joint credit cards. And sometimes a new home requires some renovation, remodelling, or decorating -- projects that may be cheaper to finance on a joint unsecured or secured credit line than on a credit card.
Both credit cards and credit lines are what’s known as revolving credit. As you pay down the balance, the money you pay back can be used again. This feature is useful for ongoing home projects, but it’s important to note that with joint revolving credit, as co-borrowers each of you may use the credit card or credit line account on your own. Either one of you can pay it off in full and close it as well.
Before agreeing to a joint credit card or joint credit line, have a frank discussion about what it will be used for, and whether one or both of you will make the payments on the account. If your relationship sours, you could find yourself on the hook for your partner’s purchases on a joint credit account, whether or not you agreed to them.
Getting a loan or mortgage together
New couples can also apply for loans or mortgages as co-applicants.
Sometimes couples get a joint unsecured loan to reduce the interest rates on individual credit accounts, and/or to consolidate debt into one larger payment instead of having several small monthly payments. One big benefit of applying for a joint loan or mortgage is that borrowers can generally borrow more money with two incomes than individually. However if you do get a joint loan or mortgage, remember you’re both responsible for making payments on time and in full until it’s paid off. If you can’t make the payments on just one income, mortgage protection/creditor insurance may be a good idea.
If you’re ready to apply for joint credit with your new partner or have more questions, stop by your local Meridian branch today and talk to one of our knowledgeable advisors about your credit choices during this new stage of your life.