Taking out a joint loan or joint bank account? What you should know before you do

Taking out a joint loan or joint bank account? What you should know before you do

If you are looking to open up a joint account with a bank and want to understand how it works please see the information below.

What is a joint account?

A joint bank account is when 2 or more people can access the money in the account and all the joint account holders can pay bills from the account, put money in and withdraw cash too. You are each given a debit card, can set up standing orders and direct debits.

How to open a joint bank account?

A joint account is similar to opening a normal current account in that each of the joint account holders fill in their own section of the form and need to provide proof of identity and address. Then they decide on who gets permission to carry out certain or all tasks on the account, this is called an authority or mandate which must be signed by all of the joint account holders when it is opened.

As the joint account will be in both names there will be no privacy of transactions between each of the account holders, you can open a joint account and a personal current account too if you would like some transaction privacy.

What if one of us has bad credit?

You are co-scored on a joint bank account which means they will look at both credit scores and combine them, so if one of you has bad credit this could affect the person with the good credit score in the future and may not be a suitable solution.

What about overdrafts on a joint account?

When you have an overdraft facility available on your joint account you should be aware that you or your partner could run up the overdraft without the other account holder’s permission and each account holder is responsible for the debt.

What happens if you split up?

The best option is to divide the money in the joint account and close it down. The bank would need both joint account holders to agree or you could both give permission to change the account into only one name.

Courts will usually decide to split the money equally in a joint account depending on the relationship of the account holders,even if one has never paid into the account. If you have a joint account with a friend then the split may be based on actual amounts deposited by each of the account holders.

Joint Loans

If you are thinking about applying for a joint loan with you partner the information below will provide you with a better  understanding as to what is involved.

Many people take out some kind of joint loan or debt because this may mean you can borrow more money than if you took one out on your own. Yyou can also be asked to repay the full loan if the other person cannot.

Types of joint loans

There are many types of joint loans that can be taken out by couples, some of which include:

  • Secured loans – such as a mortgage
    • Unsecured loans – such as a personal loan from a bank or other lender
    • Car finance
    • Joint bank accounts where there’s an overdraft facility

Joint liability

You might think that when you take out a joint loan or debt with someone else that you’re only responsible for your ‘half’ or share, but that’s not the case. If you sign a credit agreement (a contract) for a loan or overdraft, for example, with someone else you each agree to pay off the whole debt if the other(s) can’t – or won’t.

If you take out a joint loan or joint bank account with an overdraft you are responsible for paying off the debt if the other person cannot.

Whether who spent the money or now owns the items purchased using funds from the account, it does not matter as any joint debts mean joint responsibility and liability.

Can credit cards be taken out jointly?

Joint credit cards cannot be taken out in the UK, you and your partner may each have a card on the same account but there is always one main cardholder who is responsible for fully paying off the debt and the other card holders don’t have any legal repayment responsibility.

Can a joint application improve your chances of getting credit?

If you both apply for a joint loan then this could increase your chances of being approved. Remember that your credit file will be linked to the person you took the joint loan out with so if you take out an individual loan for your self in the future the lender would also see your joint applicants credit history and may take that into account as well as your own.

It’s a good idea for both of you to check your credit rating before taking out any joint credit to make sure you are both fully aware of the situation you are getting involved in

If you have experienced problems with your credit in the past and are looking to get car finance, why don’t you take a look at our information on bad credit car finance, which will help you understand how we could help you get the finance you need for your next car purchase.