What do I do if my partner is in debt?

Differences in how finances are managed can cause friction in otherwise happy couples. One partner might be frugal, while the other spends money freely, and has the debt to show for it. But when you marry, does that mean you assume your spouse’s debt, or do financial obligations incurred prior to marriage remain separate?

With personal debt in the U.S. nearly $26,500 in 2020, and credit card debt topping out at $820 billion, it pays to know your partner has debt before tying the knot. After all, your financial lives are about to become one.

What to do if your partner has debt

Money matters, so talking about finances with your partner is a must. It's important to come up with a financial plan together and find realistic ways to tackle it. While personal loans and credit card debt don’t particularly lend themselves to traditional refinancing, you still have options to pay down or pay off your partner’s debts. Here are four options you can consider if you find yourself in this situation.

1. Provide help if you're in the position to do so
2. Consider a debt consolidation loan
3. Consider a balance transfer card
4. Consider refinancing

1. Provide help if you’re in the position to do so

You said, I do. But first, make sure you can. If your partner has a lot of debt, take a step back and evaluate the financial situation together and make sure you're able to pay some of it off monthly. That is, unless, you're planning to keep your finances separate.

If you’re helping to pay off your spouse's debt, be certain your own finances are in order, and you’re both on the same page regarding your financial goals. Encourage your partner to pay down their debt. And help out if you can.

You’ll also want to determine how you’ll pay off what's owed. Will you both make payments out of a combined checking account? If payments come out of your account, will they be repaid at a later date? Will paying off the debt put a dent in your shared plans, like buying a home?

Since money is one of the main causes of arguments in marriage, you’ll want to work out all the details and crunch the numbers before providing help. This is especially true if one partner is a spender and the other is more frugal.

2. Consider a debt consolidation loan

When consolidating debt, multiple outstanding amounts are combined into one new loan, usually with a lower interest rate, more favorable terms, and one monthly payment, rather than many. You might consider a debt consolidation loan if your spouse has student loan debt, large credit card balances, or other liabilities.

9 OF THE BEST DEBT CONSOLIDATION LOAN COMPANIES

3. Consider a balance transfer credit card

A balance transfer credit card lets you transfer one or more account balances that you or your spouse has accrued on other credit cards. This allows you to manage your monthly finances more efficiently and consolidate multiple debts. With good credit, you can move high-interest debt to a balance transfer card with a 0% interest introductory rate.

If you pay off your accrued debt within the introductory period, you’ll pay no interest, saving you money. But not everyone qualifies for a balance transfer card, and you’ll likely need a credit score of 670 or higher to qualify.

HOW TO GET A BALANCE TRANSFER CARD

4. Consider refinancing

Now that you're married, your financial circumstances have changed, so refinancing for better rates and loan terms might be worth checking out. One of the main benefits of a loan refinance is the possibility of a lower interest rate. Right now, because of COVID, interest rates are comparatively low, making this a great time to explore refinancing options for ​student loans​ and mortgages​.

It’s possible to refinance your mortgage, auto loan, bank loans, and high-interest credit card debt. Suppose you or your spouse has federal or private student loans. In that case, it may be possible to refinance your loans into a new, single student loan payment, hopefully with a lower interest rate — saving you money.

You might also consider paying more each month toward your spouse’s debts or share your savvy spending and savings strategies. Create a budget, and stick to it. Having a common goal and working together to pay off debt can strengthen your marriage.

HOW TO DECIDE IF YOU SHOULD REFINANCE YOUR MORTGAGE