Can't Buy Me Love, Loans and relationships

Can't Buy Me Love Loans and relationships

By Jackie Pearson
11 February 2009

What to do when the bills, credit cards, personal loans get in the way of your relationship – a Valentine’s Day guide to financial and relationship bliss.

You love the same music and movies, share the same tastes in furniture, art and food. You even discuss politics and religion peacefully. But what about your attitudes to money? If you’re embarking on a new romance this Valentine’s Day or rekindling an old one, sorting out exactly where you stand on matters financial can be an excellent way to ensure your relationship is long lasting.

Image by PoYang

MONEY DOES MATTER

Relationships Australia’s most recent Relationships Indicators survey (2008) found that the number of people saying financial pressures were a major stress in their relationship had doubled in two years. The survey found 40% of the 1200 adults listed money troubles as a major source of pressure on their relationship.

SET THE GROUND RULES EARLY

Relationship and credit counsellors say the best way to ensure money hassles don’t sour your romance is to set some ground rules at the beginning. Decide how you are going to manage your finances. Will you maintain separate financial lives or combine your assets, investments, savings incomes and debts?

This is a very personal decision that doesn’t need to be rushed. One way to find out whether you are financially compatible before you completely combine assets and liabilities, incomes and expenditure, is to work towards a joint goal – perhaps opening a bank account to save for a holiday. Monitor how well you discuss and manage the project together before you get in too deep.

WHAT’S MINE IS YOURS

Combining your finances has many advantages. Condensing two households into one can automatically cut your expenses and give you more disposable income, making it easier to save. But it also has a downside.

For example, if you apply for credit together, and one of you has a poor credit history, your application may be rejected.  This declined application will then be recorded on both of your credit files and can make it difficult to successfully apply for loans in the future.

WHAT’S YOURS IS MINE

Be clear about what you consider to be your own role and responsibilities and about what you expect of your partner. Decide together who will pay bills, manage the day-to-day expenses and keep on top of saving and budgeting.

Taking the step from romance into a financial partnership not only means joint ownership of assets but joint responsibility for liabilities. If you place both names on a lease, telephone or electricity account, you are both equally liable for payments.

Likewise with credit cards, personal loans and mortgages . If you enter a loan as a co-borrower and your partner doesn’t live up to their side of the bargain you can be left to pay the whole debt.

GREAT TIME TO GET AHEAD

Current record low interest rates and government incentives make it an excellent time for couples who are on the same financial wavelength to get out of debt and get ahead financially. One strategy is to consolidate all your existing debts into one personal loan.

You will both need proof of earnings and to be able to demonstrate your ability to repay within your means. Both credit histories will be checked before a loan is approved. Both applicants will need to have steady work histories and it will help if you haven’t moved houses too many times.

TELLTALE SIGNS

Financial and relationship counsellors say it is important to recognise the warning signs that money is becoming a problem in your relationship. They include:

  • Your partner spending money without telling you,
  • Inability of one partner to stick to a budget or
  • Pressure to enter a credit agreement that you disagree with

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Learn more about personal loans

How much can you borrow with a bad credit personal loan?

Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans, they also get loaned less money. Each lender has its own policies and loan limits, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.

What are the pros and cons of bad credit personal loans?

In some instances, bad credit personal loans can help people with bad credit history to consolidate their debts, which can help make it easier for them to clear those debts. This is because the borrower might be able to consolidate several debts with higher interest rates (such as credit card loans) into one single debt with a lower interest rate and potentially fewer fees.

However, this strategy can backfire if the borrower spends the loaned funds instead of using it to repay the new loan. Another disadvantage of bad credit personal loans is that they have higher interest rates than regular personal loans.

What are the pros and cons of personal loans?

The advantages of personal loans are that they’re easier to obtain than mortgages and usually have lower interest rates than credit cards.

One disadvantage with personal loans is that you have to go through a formal application process, unlike when you borrow money on your credit card. Another disadvantage is that you’ll be charged a higher interest rate than if you borrowed the money as part of a mortgage.

What is a bad credit personal loan?

A bad credit personal loan is a personal loan designed for somebody with a bad credit history. This type of personal loan has higher interest rates than regular personal loans as well as higher fees.

Are there emergency loans with no credit checks?

While many personal loans require a credit check as part of the application process, some personal loans and payday loans have no credit checks, which may appeal to some borrowers with a bad credit score.

Keep in mind that even if a loan is available with no credit check, the lender will likely want to confirm that you can afford the repayments on your current income.

Can you refinance a $5000 personal loan?

Much like home loans, many personal loans can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

How can I get a $3000 loan approved?

Responsible lenders don’t have guaranteed approval for personal loans and medium amount loans, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.

Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income. Centrelink payments may not count, so you should check with the lender prior to making an application.

Can I get guaranteed approval for a bad credit personal loan?

Few, if any, lenders would be willing to give guaranteed approval for a bad credit personal loan. Borrowers with bad credit histories can have more complicated financial circumstances than other borrowers, so lenders will want time to study your application. 

It’s all about risk. When someone applies for a personal loan, the lender evaluates how likely that borrower would be to repay the money. Lenders are more willing to give personal loans to borrowers with good credit than bad credit because there’s a higher likelihood that the personal loan will be repaid. 

So a borrower with good credit is more likely to have a loan approved and to be approved faster, while a borrower with bad credit is less likely to have a loan approved and, if they are approved, may be approved slower.

Can I get a no credit check personal loan?

Personal loans with no credit checks are available and called ‘payday loans’. These are sometimes used as short-term solutions for cash-strapped Australians. They often carry higher interest rates and fees than regular personal loans, and individuals risk putting themselves into a worsened cycle of debt.

How long does it take to get a $5000 loan?

Depending on the lender, personal loans and medium-amount loans for $5000 can sometimes be approved in under an hour, and give you access to the money the same day. Other loans may take 24 hours or longer to assess your application, and you may not get the money for a few days.

Can students with no credit history get loans?

It is possible for students with no available history of borrowing or managing money to get a personal loan, though it may be more difficult as well as expensive than for borrowers with a good credit history.

Having no credit history means having no credit score. While many lenders may consider having no credit score to be better than having a bad credit score, they may still consider it riskier to lend to an unknown borrower and may charge higher interest rates or fees than to borrowers with good credit scores.

Do student personal loans require security?

While some personal loans can be secured by the value of an asset, such as a car or equity in a property, student personal loans are often unsecured, which typically have higher interest rates.

Some lenders also offer guarantor personal loans to students. These loans have lower interest rates, as a guarantor (usually a relative of the borrower with good credit) will fully or partially guarantee the loan, taking on the financial responsibility if the borrower defaults.

What do single parents need for a personal loan application?

Much like applying for other personal loans, applying for personal loans for single parents will likely require the following:

  • Proof of identity
  • Proof of residence
  • Proof of income
  • Details of assets (e.g. car, home)
  • Details of liabilities (e.g. credit cards, other loans)
  • Loan amount
  • Loan term

What is a personal loan?

A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan. However, the process is easier and faster than taking out a mortgage.

Loan sizes typically range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.