Money can’t buy love—but it can affect the health of your relationship.
Studies show that financial problems are one of the leading causes of marital conflict and divorce.
Though it can be overwhelming to talk about money, your ability to discuss your finances and manage your expenses as a couple can be a saving grace for your relationship.
This fact is applicable, especially when you’re taking out a loan with your partner for a milestone in the relationship, such as buying a new house or even starting a new business venture together.
The good news is that you can reduce any relationship and financial problems by considering these factors:
1. Their financial habits and standing
It’s not easy to pay off loans. Before you take out a loan together, you have to ensure that your partner is truly financially capable of paying it off with you.
Douglas Boneparth of Bone Fide Wealth New York emphasizes that money can stress people out, so you have to discuss your partner’s spending habits and financial standing as soon as possible.
Different spending and saving habits can be a significant source of conflict for couples because it can affect your ability to cover daily expenses, rent, and joint loans.
By discussing their financial habits and standing, you can address issues and fix bad habits before adding another financial responsibility onto their plate.
2. Their credit history and debt-to-income ratio
Your partner’s financial habits may be good now. But if your partner has a bad history of debt, it’ll be difficult for you both to take out a joint loan.
As such, you’ll also have to take a good look at their debt history to assess their eligibility and attitude toward loans.
A personal loan eligibility post by Sound Dollar explains how this is based on one’s credit score.
This is because it allows lenders to gauge the amount of debt you have as a couple and your ability to pay off these debts on time.
Lenders will also assess your individual income and debt-to-income ratios to ensure that you can repay the loan.
Likewise, you can look into these factors to check if your partner can be trusted with another loan.
3. Your ability to discuss money as a couple
You and your partner may need to discuss the loan several times throughout your relationship.
Fortunately, these discussions can be easy if you and your partner can talk about your finances properly.
Jean Chatzy shares in her book Talking Money that couples should not just go over financial details, but also talk about their feelings, experiences, and hopes related to money.
Since you’re borrowing money together, you both have to be honest if any of you fear risking your hard-earned money or if any of you disapprove of the other’s spending habits.
Through these upfront discussions, you can iron out financial issues that may come up while you’re taking out a joint loan.
4. Your plan in case of any trouble
Anything can happen in your relationship, including unfortunate times like job lay-offs or even breakups.
After all, a study on Debt Concordance and Relationship Quality reveals that 44% of couples are discordant regarding their debts.
Due to differences in debt management strategies, these couples have lower satisfaction in the relationship.
It may seem pessimistic to think about worst-case scenarios, but you and your partner must have a formal plan regarding your shared debts.
Creditors will still hold you both accountable for the loan no matter what happens to the relationship, so try to agree on a specific setup in case things don’t work out.
For instance, the partner who wants to keep the asset may need to buy out the other partner’s interest and cover the payments they’ve made.
Conclusion
Many couples take out debts to start a new chapter in the relationship.
You can make sure that you and your partner will have a bright future by going over all these factors before saying ‘I do’ to a joint loan.
Recommended Reading:
How To Manage Your Finances As A Couple