Joint and co-signed loans and credit cards are the full responsibility of all borrowers. Good communication can help ward off problems.

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Q: My partner and I just bought our first home together and because he needs to move a lot of things for his business, we will have two homes for about three weeks. It means we’ve got double the bills for that time but it will save our sanity. There’s no way we could have bought our new place without applying for the mortgage together, but we both have bad experiences with joint debt. It took me almost 10 years to pay off debt from a previous relationship. For four years my partner has been trying to deal with the joint debts he had with his former spouse. Other than the mortgage, the only other joint debt my current partner and I have is the credit card we use for all of our household expenses. We don’t have the best track records with joint debt; I’ve even had to make payments on the car loan I co-signed for my son. What can we do to manage our joint obligations better? ~Lana

A: Joint debts usually start with the best of intentions. A joint mortgage to buy a home and start a new life with your partner. A joint credit card with a son or daughter to help them build their credit rating. A co-signed cellphone contract to help a friend. A joint bank account with a large line of credit just in case you need it.


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Joint debts, with two or more people, are great when everyone is doing their part and fulfilling their obligations. However, when someone is unable or unwilling to honour their joint obligations, that’s when things get complicated.

Most people are under the mistaken impression that a joint debt means 50/50 responsibility with your co-borrower. But that is not how it works. Each person is 100 per cent responsible for whatever is outstanding. Even when someone is no longer your spouse, unless there is a new legal agreement with the lender to sever your joint liability, you’re both still responsible.

Joint can mean co-borrowing or co-signing

The most common way a debt becomes joint is when borrowers make an application for credit together. The person with the higher income and stronger credit rating might be the primary borrower, but that isn’t always necessary. Sometimes the primary borrower is simply the person who started the application process first. As co-borrowers they agree to make all of the required payments, but how they choose to share them is left up to the borrowers.

A co-signed debt also has a joint aspect. When someone applies for credit and their credit rating isn’t as strong as it needs to be, a lender may ask if there’s someone they know who can come alongside them to strengthen their application. A co-signer is typically a close family member or friend who wants to help their loved one get ahead.

Borrowers and co-signers go through the same application processes. Income is verified, credit is checked, asset and liability statements are taken, and debt servicing ratios must be adhered to. This means that when you borrow on your own, together with someone else, or co-sign for someone — you are fully responsible in every way for the obligation you’ve taken on. Information is reported to the credit bureau companies for all borrowers and co-signers. Whether you think of the debt as “yours” or not, in the eyes of the lender it is.


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Does being a guarantor mean you have joint debt?

A less common type of joint debt is when a borrower has a guarantor. In many ways a guarantor is like a co-signer, but a step removed. They are qualified during the application process, just like the borrowers are, but the relationship is really just a promise to pay should the borrowers default. As a condition of becoming a guarantor, they must typically receive independent legal advice so that lender can be sure they understand the agreement. That’s because a guarantor doesn’t have the same access to the loan or credit that the borrower does. It’s a legal promise to pay a debt but with no monetary benefit.

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Is an authorized user on a credit card also joint?

A unique type of “joint” credit card is where the primary borrower authorizes others to use their credit card account. While each authorized user has a credit card in their own name, they are not co-borrowers and the credit card account is not joint. Responsibility for all that is owed rests with the approved borrower(s). Authorized users are not able to make changes to the account, are not subject to credit checks, might have limits on how much they can charge during each billing cycle, and using their card does not build or rebuild their credit rating.

Despite their limitations, authorized user cards have their place. It’s one way to give a teenager or anyone else who can’t apply on their own a credit card to use for emergencies. If the credit card has features, e.g., travel medical insurance, that you want to extend to your family members, an authorized user card usually does the trick. It also allows you to combine finances with your spouse and work together to earn travel miles or reward points more quickly.


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Credit reporting with joint debts

Payment information about joint and co-signed debts is reported to the credit bureaus each month for all account holders. If you aren’t sure that your partner, son/daughter or friend is making payments on time and in full, you may want to assume responsibility for doing that. Co-signing or becoming joint with someone can either help or hurt your own credit rating because the debts are treated as if they are 100 per cent your responsibility.

Guarantors are treated a little bit differently when it comes to credit reporting, and it can depend on the lender as well. Most of the time the initial debt is reflected on a guarantor’s credit report, e.g., a loan for $10,000, but payments are not reported each month as long as the borrower makes them as agreed. If the borrower defaults, then the debt is reported normally on the guarantor’s credit file because they are now responsible for making the agreed-upon payments.

What happens to joint debts when a relationship ends?

It is often not until problems arise that a former couple finds out how joint their debts really are. Sometimes couples agree to divvy up making payments on their joint debts, but the debts should be frozen at that point so that the balances don’t increase. Allowing your ex to make payments on a debt that is still in your name too comes with the risk that if they stop making payments, the lender will expect you to pay off what is owing.

Splitting up debts when a relationship ends isn’t always possible. Each person must apply on their own merits (e.g., income and credit rating) and satisfy the lender that they can afford to make the payments. The reason for this is quite simple. When debts are joint and go into arrears, the lender can demand repayment from all those who are joint. The more people responsible for a debt, the greater the likelihood that it will be paid in full.


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3 Strategies to Manage Money as a Couple

How not to get caught by joint debts

The best way to protect yourself from joint debts is through preventative measures. If you can, start building up your credit rating and savings. When the time comes for you to apply for a loan, you won’t need a co-signer.

If you’re being asked to co-sign for a loan or credit card, it’s best to exercise caution before agreeing to anything. With a loan, determine if it’s something you can realistically pay off without putting the rest of your finances in jeopardy.

The Dangers of Co-Signing

With a joint credit card, you can request a low limit to avoid the temptation of overspending and piling on debt. You can also set some spending boundaries for yourself around usage (e.g., only gas and grocery purchases) or spending amounts (e.g., nothing more than $100 per week). Whatever terms and responsibilities you agree on, it’s important that you put them down in writing.

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Once you’ve taken these precautions, it’s also important to keep the lines of communication open and to monitor the joint account, to ensure neither account holder is spending too much and that payments are getting made.

How to Start Talking with Your Spouse About Money

The bottom line on joint or co-signed loans and credit cards

Entering into joint debt agreements is not a decision to make lightly. Reserve doing so until you have an understanding about your partner’s money habits and insight into their credit behaviour. Taking precautions is great, but nothing replaces good communication. Establish and use a household budget to stay on track and hold yourselves accountable. And keep in mind that if your name is on a loan or credit card, you need to have a hand in ensuring that the payments are made according to the schedule set out by the lender — because good or bad, they will be reported on your credit file, too.

Related reading:

What Happens to Joint Debts in Bankruptcy?

How to Pay Off and Make Joint Debts Work

Checkup on Your Finances and Goals

Scott Hannah is president of the Credit Counselling Society, a non-profit organization. For more information about managing your money or debt, contact Scott byemail, check nomoredebts.orgor call 1-888-527-8999.


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