Relationships & money

Close relationships often take strain when finances are involved. Don’t let love blind you – protect yourself financially

AS MUCH as you may be in love right now, it’s a fact that relationships sometimes end – and that you could be left with a mountain of debt. There’s also the danger of wanting to give your kid the world even though you can’t afford it.

Here are five debt traps to look out for when it comes to loved ones – and how to avoid them.

1 SIGNING SURETY

This is when your partner borrows money – whether a cash or home loan – and you agree in writing to be their guarantor. That means if they default on the loan, you’re responsible for the unpaid debt. And you remain responsible, even if the relationship ends.

Your name is on the contract and if the other person doesn’t pay their instalments, creditors will come knocking on your door. The fine print might even stipulate that a creditor can seize your assets immediately upon default, without even trying to get the money from the other party.

Make sure you understand the contract. For example, if it contains Latin phrases, make sure you know what they mean.

There’s no easy way out of surety apart from costly legal processes, says Matthys Potgieter of DebtSafe. Rather play it safe and decide beforehand not to sign surety for anyone or their business.

2 MARRYING IN COMMUNITY OF PROPERTY

If you’re married in community of property, it means you and your spouse are jointly responsible for any debt either of you incurs for the duration of the marriage. That means if your spouse is unable to pay their debt, creditors can claim the money from you.

This could happen even after a divorce, provided the debt was incurred while you were married. A debt collector can get a court order to recoup the debt from you.

But if you were married out of community of property you’re not automatically liable for your spouse’s debt. Even if you’re married out of community of property but with accrual, it’s likely creditors won’t hold you liable for the debt.

3 BUYING FOR YOUR PARTNER*

This is a common problem debt counsellors come across, Potgieter says. It happens when for example you go into credit card debt to buy expensive gifts such as furniture, clothes, electronics or jewellery. Love may leave but you’ll be stuck with the credit card debt. If you struggle to pay it off, your credit record will also suffer.

Remember you can end certain credit agreements in writing because you have the right to return certain expensive items (such as furniture or a car) if you can no longer afford the monthly payments.

But returning such an item doesn’t necessarily mean you’re debt-free, as the credit provider must then resell it. If the reselling price is less than the amount you still owe, you have to pay the credit provider the difference.

4 DEBT FOR YOUR CHILD

You can apply for a student loan on your child’s behalf. You’ll be the guarantor of the loan and pay the interest and service fees while your child is studying. This means that when your child graduates they’ll have less debt.

Although this may seem a noble thing to do, it can backfire because if your child quits before graduating you might be expected to repay the interest and the full loan amount immediately.

This is because the child is probably unemployed and unable to pay it back, making you as the guarantor liable.

If you decide to apply for a student loan, both you and your child need to understand how much it’s for, as well as who’s responsible for what payments.

5 CONTRACTS ON BEHALF OF SOMEONE ELSE*

It’s possible to take out cellphone or gym contracts, for example, where you’re indicated as responsible for payments although someone else is using the contract, but strictly speaking this isn’t debt, it’s another way in which you can be held responsible for someone else’s spending.

It’s possible to cancel these contracts but it’s not easy – strict cancellation fees are charged because the contract usually stretches over an extended period, such as 24 months.