It’s understandable if you’re not keen on moving in with your boyfriend’s family or visiting him at his parents’ house. Your life goals may also be put on hold while he sorts out his finances.
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On a more emotional level, you have every right to be upset that he neglected to tell you about his debt in the first place. This is a huge betrayal to uncover just as you start planning a life together. After all, what else could he be hiding from you?
Here are some important factors for you to consider and steps he can take to tackle his debt.
Should you build a future with him?
While your partner needs to come up with a debt repayment plan (more on that later), you also need to ask yourself some important questions. For example, is his debt a one-time crisis or is it part of a pattern? And are you willing to put your dreams on hold while he’s living with his parents?
While it’s a good sign that he’s taking responsibility for paying back his debt, how can you ensure this won’t happen again, especially if you get married and have kids?
If you stay with him, and if you’ll do eventually get married, you may want to take steps to protect your finances.
That could mean a co-habitation or prenuptial agreement or simply maintaining financial independence through separate bank accounts and retirement savings plans. You may also want to avoid co-signing loans, sharing accounts or merging accounts.
You would also have to accept that you may have to put your dreams on hold while he pays off his debt, whether that’s buying a house and having a kids or preparing for an early retirement — and you’ll need to feel confident that his debt is the result of a one-time crisis and not an ongoing pattern of behavior.
Research has shown that financial stress is linked to less relationship satisfaction for both partners. If you’ll are committed to making it work, then it may be worthwhile for the two of you to seek professional advice from a financial advisor or credit counselor and perhaps couples therapy.
Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
How to deal with credit card debt
Credit card debt can quickly spiral out of control, especially in today’s environment. The average APR (for a new credit card) sat at a whopping 24.28% in May, according to Lendingtree.
Let’s say your partner has a 20% APR on his credit card. That means he’d be paying more than $1,300 a month just in interest — so little to no progress could be made on the principal unless larger payments are made. Making a minimum payment (which often falls between 1% to 5% of the outstanding balance) wouldn’t even make a dent on the interest.
So, it makes sense that he would consider moving back in with his parents (under the assumption that they’d charge him minimal or no rent).
He could take that rent money and put it toward his credit card debt instead — say, through the debt avalanche method, which involves paying down your high-interest debt first, then moving on to debts with lower rates.
If he has multiple unsecured debts, he could look into debt consolidation through a balance transfer credit card or a debt consolidation loan. While this won’t lower the amount he owes, it could make it easier to pay back by combining multiple high-interest debts into a single monthly payment and it’s possible he will get a lower interest rate.
With balance transfer credit cards, keep in mind that the low-interest rate is typically only offered for a limited introductory period and there may also be extra fees involved. This should only be an option if he is confident he can repay the debt within the introductory period.
He may also want to consider getting a side hustle or a second job, even for a short while, to pay back his debt faster (and get out of his parents’ basement faster). Or, he could ask to take on extra hours at work or even negotiate for a higher salary.
All of this will be a moot point, however, if he’s not able to get his spending under control. That means living with his means and sticking to a budget. He may want to seek advice from a nonprofit credit counseling service if he’s struggling to do this.
If, however, his credit card debt is more than 43% of his gross annual income, he may want to explore debt relief options, such as a debt management plan, debt settlement or even bankruptcy.
For someone with multiple high-interest unsecured debts, a debt management plan offered through a credit counseling agency could help by consolidating those debts into one and reducing the interest rate, while providing a structured timeframe for paying back the debt.
Debt settlement involves negotiating with creditors to reduce the amount you owe. Keep in mind this could damage your credit score — plus, you may have to work with an intermediary, which will often charge a hefty fee (and you may owe income tax on any debt that’s forgiven). “You also have to watch out for dishonest debt settlement companies that make promises they can’t keep, charge you a lot of money, and then do little or nothing to help you,” warns the FTC.
Bankruptcy, which allows you to reduce or repay your debt, is often considered a last resort. Chapter 7 bankruptcy allows you to clear some or all debt, but you’ll have to hand over your assets. Chapter 13 bankruptcy allows you to keep those assets but you’ll have to pay back part of your debt within three to five years. Declaring bankruptcy will stay on your credit report for 10 years. “The negative credit score impact of bankruptcy eases as time passes, but some lenders refuse to extend loans or credit to anyone with a bankruptcy entry on their credit report,” says Experian.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
