Is it a good idea to take on additional borrowing before a divorce?

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Notary public in office stamping document

When it comes to financial affairs and separation, timing could be everything.

Divorce can be an expensive business and covering the costs of a split may require a little help. Overdrafts, credit cards and personal loans may all be needed to help cover costs where there is something of a financial gap, according to online broker Solution Loans. However, is it really a good idea to take on additional borrowing before a divorce, especially if it could risk creating a poor credit record for one or other half of the couple (find out more here)?

If you need the money then yes

The financial side of divorce is complex. It can be a shock to discover just how much the process costs and what is going to be involved in separating two people who were previously a couple. If you need additional borrowing to help fund the deposit for somewhere new to live, to cover lawyer’s fees or other essentials then you may have no choice but to apply for additional borrowing. The key will be to get the best possible deal on that borrowing and to ensure you can afford the repayments.

Be wary of joint borrowing

If you’re signing up for additional borrowing right before a divorce and the loan or overdraft is going to be jointly borrowed with your partner then it’s a good idea to pause before you sign anything. Relations can sour quickly during a divorce and it doesn’t take much for an emotionally charged situation to explode. Even partners with the best of intentions could find themselves looking for ways to take revenge and that may mean, for example, spending up to the limit on a shared credit card. Remember that – in that scenario – even if your partner does all the spending, you’re still liable for the repayments.

Don’t agree to anything out of guilt

Even if you are responsible for the breakdown of the relationship it’s important to try and keep financial circumstances separate from emotions. If you find yourself being manipulated into agreeing to joint borrowing because of something you’ve done then it’s worth taking a step back to consider why your partner wants that to happen.

Remember the impact on your credit score

When you share a credit account with someone your credit reports become linked until you are financially separated and have requested a notice of disassociation. If you enter into joint borrowing now then if your soon-to-be-ex partner does anything to affect their own credit score, it could drag yours down too.

And if you’re borrowing on your own…

  • Create a post-divorce budget and make sure that you’ll have enough to cover all the repayments
  • If the borrowing is a bridging loan until the divorce settlement, you need to ensure you have enough to cover repayments until the divorce settlement is agreed
  • Remember that financial settlements in divorce are not certain until everything is signed. If you’re hoping to use the settlement to pay off the loan then be wary that everything can change.
  • Avoid borrowing for anything unnecessary right now – you might feel like you need a new wardrobe or a holiday but it’s often better to enjoy these things once the dust has settled instead.