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Getting married is one of life’s most significant milestones. It’s a celebration of love along with a legal binding of two individuals to commit to each other for the rest of their lives. If you have some level of debt before your union, you may be wondering if it will carry over or affect your partner after you get married.
The short answer to this is “no”, your debt and resultant credit score will not affect your partner after marriage. The only way it would is if both of you have joint accounts or joint lines of credit. If both of you have personal accounts and your partner usually repays the debt on time, there’s no reason why it should cause any trouble.
However, having a poor personal credit score of a high level of debt in relation to your salary could result in a few complications when planning your post-marriage finances.
As a soon-to-be-married couple, the biggest joint purchase you’d have to make is buying a house together. Having existing debt could complicate this due to two reasons – your Total Debt Servicing Ratio (TDSR) and your credit score.
If you’ve ever missed payments, it will lower your credit score. Lending institutions usually look at your credit score before determining whether to extend a loan to you. The TDSR, on the other hand, is a rule that only allows 60% of your salary to be used for debt repayment every month. If your debt is on the higher end, you may not be able to take out the entire loan amount you need to buy the home of your choice.
Both these factors will affect the size of the loan that the Housing Development Board (HDB) or bank is able to grant you. If you go with a bank loan, these factors can also affect the interest rates or tenure that are offered.
It wouldn’t matter if your partner is completely debt-free and has a stellar credit score if you intend for this to be a joint purchase. The only way that your debt can be removed from the equation is if your partner applies for the loan in his or her name alone.
Unfortunately, that could also result in a smaller loan amount as compared to what the both of you could get together. In the end, you may need to settle for a loan with higher interest, a longer tenure, or a smaller amount because of your existing debt.
Fast-forward a few years into your marriage. You’ve managed to secure a home loan, but you’re still working to repay the debt you had before getting married. As you and your spouse are more financially stable now, you might wonder if it’s a good idea to take out a joint loan that is lower in interest to pay off the ones you already have.
If the both of you are confident that taking out this loan will save money in the long run, it could be a good idea. However, this is quite a big decision, as applying for a joint loan will further tie up both of your finances.
Both your credit scores will be affected in the event that you default on a loan repayment. Assuming that your partner is still the holder of a respectable credit score, this will bring their score down.
In the long-term, having to constantly finance debt can be a draining routine. You may find that it has become difficult to put aside a good amount of savings because of the constant repayments. If this persists, you and your spouse may not have enough funds saved up for emergencies, leaving you in a very vulnerable position should anything untoward occur.
Not having enough savings also limits you from making any investments. If you plan to have children in the future, there will be further expenses to account for which will continue eating into your savings. Lastly, you won’t be able to get a head start on planning for your retirement, which may result in you not having enough funds by the time you hit that age.
The concerns above can evolve into larger ones if you don’t keep a handle on your debt. There are a few simple ways you can do this.
Having a clear financial plan that you and your partner commit to following will go a long way to clearing your debt as quickly as possible. A detailed budget will also show both of you where your money is going every day and where you can possibly cut down.
In addition, frequent reviews will inform you of the state of your debt and can help you see how many payments are left. By doing both these things, you’ll be able to channel your ‘extra’ funds into the repayment and potentially cut down on the time you need to repay everything.
If at any point you feel like your debt is going out of control, there are resources and strategies that you can apply to help your situation. There are several personal finance websites that tackle the debt issue by providing informative articles about debt management and possible solutions.
In more serious situations, you may have to seek professional help. Credit Counselling Singapore is an independent organisation that provides assistance to people struggling with debt. Workshops, counselling, and debt management programmes are some of the services they offer. You may also want to consider a Debt Consolidation Plan if you have several types of debt.
A marriage is a promise to be there for each other in times of joy and in hardship, and it’s important that you continue to openly communicate with your partner about the status of your debt. Sharing your struggles will allow your partner to better support you until you make that final repayment.
Even though debt can seem like an insurmountable problem, proper management will ensure that it doesn’t take over your life.