The Smart Debt Repayment Plan for Couples

by Christy Bieber | Updated July 21, 2021 - First published on Sept. 11, 2019

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Do you and your partner both owe money? Here’s how you can tackle your debt together as a team.

Do you and your partner both owe money? Here’s how you can tackle your debt together as a team. 

It’s very common in this day and age for both people entering into a relationship to carry at least some debt. This could be credit card debt, personal loan debt, or other types of consumer loans. Many couples also take on debt together, often to buy a house or accomplish other joint financial goals.

When you find yourself in a situation where you both owe money, you’ll have to decide how to tackle the debt as a couple. This can be easier said than done, especially if your debt balances are big. But taking the three steps described below can help you to find a debt repayment plan that works for both partners.

1. Consider combining your efforts to repay debt ASAP

If you are married, considering marriage or in a committed relationship, you and your partner will need to have a serious conversation about debt. You need to decide whether you each want to work on debt payoff separately or whether repaying your debts is something you’ll do together.

There are some significant benefits to teaming up. For example, if you have a lot of high-interest consumer debt, you could apply for a joint personal loan to consolidate and refinance that debt. If one spouse has better credit than the other, you could potentially get approved for a loan at a very favorable rate and make debt paydown much less expensive.

If you team up and work on jointly paying off all the debt you each owe, you can also prioritize paying off high-interest debt first. Ideally, by combining your finances and putting as much extra money as possible towards debt with the highest interest rate, you could get that debt paid down ASAP and save yourselves a fortune. 

There are some downsides and risks to working together on debt repayment, of course. If your relationship ends, you may end up feeling you wasted money on helping your spouse or partner to repay their debt. That's especially true if you had your own loans to pay, but instead put a lot of your earnings towards retiring your partner’s debt. And if you get a joint loan, you risk becoming legally responsible for your partner’s debt -- even in the event of a divorce or if your partner passes away.

Only you can decide if the risks outweigh the benefits. However, you can mitigate those risks with a life insurance policy and with a prenuptial agreement or cohabitation contract that addresses how assets and debts would be divided if you split up. Just be aware, though, that if you take out a joint loan, creditors could still try to collect from you, even if your divorce or separation agreement says your spouse or partner is the one responsible for making payments. 

2. Set joint goals for debt payoff

Regardless of whether you combine your debt repayment efforts, it is still a good idea to set joint goals for paying off debt. That’s because your partner’s debt will affect you even if your finances are kept largely separate. Your partner’s debt will affect the amount of spare cash he or she has, and impact other financial goals such as buying a home. 

Both partners should disclose their debt before moving in together, getting married, or otherwise merging their lives in a serious way. If you’ve already passed those milestones without a discussion about debt, you need to have this conversation ASAP. 

You should also decide together whether you want to pay extra towards your debt and what your payoff goals are. Get on the same page, because if one of you wants to pay a lot of extra money to creditors to become debt-free ASAP and the other plans to keep using credit cards and carrying a balance forever, this is inevitably going to lead to big problems. 

Setting joint goals for debt payoff not only helps you to make sure you’re both committed to debt freedom, but it can also help you both to remain accountable and ultimately be more effective at debt paydown. If you know your partner is counting on you to get that card paid off by the end of the year, you’re far less likely to skip an extra payment and splurge than you might be if you had no one to answer to.

3. Be realistic about how debt affects your shared financial life 

Finally, it’s important to really recognize how the debt you each have is going to affect what you’re able to do financially. If you’re planning for early retirement but your spouse has hundreds of thousands of dollars in loans and will need to work until his or her 80s, this is going to be a big issue if you don’t address it. 

Your partner’s commitment to debt payoff may also mean you need to live in a cheaper apartment, can’t take big vacations, or have to put off having kids. You should talk about the impact your debt is going to have when you set your payoff plan because this will help you to decide just what you’ll need to sacrifice to get your debt paid off on the schedule you both agree you need. 

Working together can help make debt payoff easier

Whether you combine your finances and team up to pay off high-interest debt first or you simply support each other in your separate efforts to pay down debt, it’s important that you treat debt as a problem that affects both of your financial lives. 

If you make a joint commitment to address your debt ASAP, you’ll hopefully be free of your financial burdens sooner rather than later and will be able to team up to accomplish other, more fun, financial goals.

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