In the event of a divorce , many wonder what happens with the loan they have together?
It is very common to apply for personal loans as a couple, since it may be easier for them to grant you the money you need if they are two of the same.
Even, the safest thing is that you can get better financing conditions and also the expenses are shared between two.
So it is very common that, if you have a stable partner, it occurs to you to request the loan in the name of both.
Unfortunately, only during the last quarter of last year, there were almost 100,000 divorces in Spain , according to the General Council of the Judiciary .
In this article, we will look at several ways in which you can handle the issue of shared loans in a separation.
If you are in this situation it will help you a lot, and if you are not in this unpleasant situation, which is great, maybe it will help you to take it into account for a friend or family member.
“If I divorce”
Going through a divorce is a painful process on the personal front.
And it becomes even more complicated for a couple if they have taken a loan in common.
Therefore, it is better to consider the possible financial consequences in case of a divorce.
So it is important to reach an agreement with the other person, so that neither of them gets harmed in their respective personal finances.
Know in this article the errors that can be expensive at the time of divorce, avoiding them can make it easier to overcome this situation.
Let’s see what you can do when you decide to separate yourself from your partner and have debts in common …
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What can we do to distribute the personal loans requested in common?
You must bear in mind that when you request a personal loan with two owners , both are responsible for paying the same.
In addition, a separation or a divorce does not affect in any way the liability that both have acquired with the bank.
So if you divorce you continue having the same responsibilities.
However, I will present several options to which you can go to resolve this issue, and are the following:
In the event that the break has been friendly and both parties have finished well, this option is the simplest and also the one that requires the most confidence between both parties.
It would be leaving an open joint bank account where the loan payment is domiciled and where each party makes the corresponding income for half of the amount to be paid in each monthly payment.
The negative aspect of this option is that one of the parties decides not to continue paying, or that it contracts other products or services through that account and ends up leaving the other owner with more debts than at the beginning.
Therefore, it is worth emphasizing that this option can only be feasible when you trust your ex-partner fully and you know that he will not do the above.
Negotiating what to do with what should be done
This option is usually clarified in the divorce agreement, in which it will be seen which of the two holders will be the one who has to take charge of the repayment of the loan.
In general, who should take charge will be the person who will enjoy the good that has been financed through the loan.
The not very positive part of the option to negotiate is that, as with the option to share the debt, there are still two holders before the financial entity.
Therefore, if the person who was asked to pay for it does not do so, the person who did not have to pay for it will also be affected, and this can cause many problems.
If this happens, not paying the loan is the worst solution.
The best solution would be that the person who did not have to pay the loan, do it equally, since, although it does not correspond to him, the inconveniences of leaving a financial service in default will fall on him as well.
But of course, once the fee is paid, the affected person must go to the judicial channels to claim the fee or fees that he has paid to his ex-partner.
Maybe it would be very interesting to calculate the personal loan and thus know how much you have left to pay and how to deal with that payment. You can read the article where we explain how you can calculate a personal loan correctly.
Cancel the loan
This is one of the easiest and most desired options, since in this way you radically end the problem and you will not have any debt in conjunction with your former partner.
This is achieved with an early amortization of the personal loan.
If necessary, you can sell the property that you have financed to be able to meet the repayment of the loan.
The negative part of this option is that early amortization is not always covered with the sale of the financed good.
Or even that what has been financed is not something material that can be sold (a trip, a reform, etc.)
Another aspect that can happen is that your former partner does not want to sell the good to deal with the amortization, perhaps the next point can help you in this situation.
Change ownership of debt
This option is usually the safest option, since the owner of the personal loan contract is changed to put in the name of one of the two spouses nothing more.
In this way the party that stays with the well financed will be the one that takes charge of the payment of the same, being the other part free of debts in conjunction with the former partner.
The downside of this option is that, as a general rule, this procedure, in addition to carrying out a lot of paperwork, involves extra expenses.
In addition, the party that remains as the sole owner of the personal loan has sufficient solvency to face the payment of the financing of the asset in question.
There is also the possibility that the lender does not see with good eyes that the loan is only in charge of a single person.
This will depend on the amount owed and the income of the person who wants to keep the debt.
Get a new loan
The simplest approach is to pay the loan under both names and replace it with a loan in the name of a person.
Usually this requires a refinancing of existing loans.
For example: get a loan or mortgage to pay off the previous loan.
What entails the responsible person obtain approval on their own, may be the case that the income is not sufficient and the credit is denied.
But if approved, this is your best option, so having an online loan can be a great help at that moment.
How to know when you have to divorce? Doing it in common agreement is the best option for both parties.