How to separate joint debt after a divorce

Splitting up with a partner is hard enough – but money can make it even more challenging. Here are some tips to help you start afresh when you make the transition from joint to single finances.

If you've been borrowing together for some time, your credit limit may suddenly go up or down when you sever financial ties with a partner.

Many couples have a bank account, loans and a mortgage in both names. If you and your partner are separating, you'll need to tell any banks, lenders and companies where you have a recurring payment, such as a Direct Debit.

If I get divorced, do I still have to pay my loan?

• Start by checking the loan documents. If you're borrowing in joint names, you're both liable. You might be able to switch the loan to a single name – mortgage companies might be willing to let you do this, but there's no guarantee. You'll be subjected to their affordability and responsible lending criteria, so it's a good idea to contact your loan provider who'll be able to advise you of your rights and options under the agreement.
• Think about whether you can afford to borrow on your own. If not, you could speak to your lender about reducing your monthly payments, or paying the loan back in smaller amounts over a longer period. Of course, this means additional interest will be payable, and you'll pay more overall as a result.
• Try negotiating a better interest rate. A fixed rate can be useful although if you're due to remortgage in times of high inflation or when rates are expected to rise, talk to a mortgage advisor first. If you're on a fixed rate, you’ll have an exact figure to budget against each month. Some rate changes will be subject to charges, so factor that in or talk to a financial adviser to work out the best approach.

If your divorce will leave you with a lump sum settlement, you could pay off some or all of the loan. But check the fine print to make sure you won’t get charged a penalty for doing so. Financial advice should also be sought for this situation to ensure you're doing the right thing.

How do I budget after a divorce?

Whether you're borrowing on your own or with someone else, it’s important to take care of your budget. Only use savings to pay off debt if the sums make sense. If your debt costs you more than you can earn in interest on your savings, you should consider paying off the debt first.

Setting aside some cash for emergencies is an excellent way to keep your spending and interest payments under control.

If you're still going to share with your former partner, it may not be wise to split everything 50/50 – especially if one of you has a larger income or more outgoings. A shared cost plan can be pre-agreed with your divorce lawyers.

An important next step for getting better deals when you're borrowing on your own is to improve your credit rating.

How can I boost my credit score after a divorce or split?

The first step is to have a copy of your credit report, which is a record of your borrowing, including loans, mortgages and credit cards. Lenders use it to work out whether to give you credit and at what interest rate. The information in your report informs what your credit score is – the higher your score, the more likely you are to be accepted for credit.

• Make sure you're on the electoral register, especially if you've moved house, as you'll need this to apply or transfer a mortgage.
• Check your credit report is correct. When you have joint accounts or loans with another person, they will be linked on your credit file – even if you're not married. To unlink, you'll need to close any joint accounts and loans, and let your credit agency know.
• Pay your bills on time and cover at least the minimum monthly payment on any credit cards you might have.
• Keep building a history of managing credit responsibly to build your score over time. At the same time, avoid using too much of your available credit limit to optimise your score.

These are the sorts of healthy financial habits that show lenders you're good at managing money and should help improve your credit score.

When applying for a loan, you'll need to have at least the last 3–6 months' bank statements to hand, depending on your circumstances (and at least the last 3 years business tax filings if you are self-employed) to show your earning and spending patterns.

Can I borrow on a mortgage as a single person?

If you already have a joint mortgage, you can speak to your bank or building society about transferring the mortgage or a new top-up loan solely into your name. You may have to pay a fee.

Before agreeing to the mortgage, the lender will look at your credit record to see how much you earn and spend each month. They will also look at spousal maintenance order payments, if applicable.

The same will be the case if you're taking out a new mortgage with your existing bank or building society. Regardless of whether it’s a new or existing lender or broker, it will mean a new application process along with evidence of a deposit.

Recommended reading

• How to protect your financial interests during a divorce
• Is it worth putting off divorce during the cost of living crisis?
• Is debt always bad?

Whatever you decide to do, look after your money. Chase's easy-access saver account lets you start saving with as little as you like.

18+, UK residents. A Chase current account is required to open a saver account.

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