How to take out a joint loan in Germany

Whether you’re setting up a home with someone or sharing a car⁠—there are lots of instances when it makes sense to take out a loan with your partner. But is there any way to get out of a joint loan if your relationship doesn’t work out? In this article, we’ll cover the basics of joint loans and what you need to consider before applying for one. Let’s go!

A joint loan is a loan taken out by two parties—meaning that both signed the loan agreement. It’s a great way to finance a house, or embark on another important investment with another person. But how do you take one out, and—in the unfortunate event that the relationship ends—how do you get out of the loan? 

If you entered into a loan with your partner—regardless of whether you’re married or not—it will be classified as a joint loan, meaning you’re both equally responsible for meeting the loan payments. This also means you’ll both be responsible for any debt that comes from missing monthly payments. This is called joint and several liability.  

It’s also important to note that just because the contract was signed by two people, it doesn’t mean you both need to cover equal amounts of the debt. If one person is unable to pay, the other person needs to make up the full amount. In other words, you’re on the hook if your partner can’t pay their share.

In principle, joint liability applies to home loans in the same way: if you both sign the agreement, you’ll both be liable, even if only one of you is registered at the home in question.

In the event of a breakup, both you and your ex will still be responsible for paying back the loan you took out together. However, there are ways you can get out of a joint loan. Here are three of them:

Let’s say you and your ex bought a car with the joint loan, but neither of you wants to keep it after you’ve broken up? If that’s the case, you can try to sell the car and settle the loan ahead of time. However, keep in mind that the bank might charge you a prepayment penalty if you repay your loan earlier than planned, causing them to miss out on interest payments. So, make sure you check the terms of your agreement.

What if you and your ex took out a loan to buy a new kitchen, but you keep the flat—and therefore, the kitchen—post break-up?

For installment loans, there’s the option of loan consolidation⁠. This makes the most sense if you also have other loans that you’re paying off, as you can wrap them all into one convenient payment. In this case, you’ll take out a new loan combining all your debts in your name, and use the money to pay off the former kitchen loan, taking your ex off the loan completely. However, bear in mind the lender might charge a prepayment penalty here, too.

If you can’t consolidate the loan but one of you wants to remain the sole contractual partner, you’ve got the option of transferring the existing loan. For example, if you want to keep the car that you bought, you can get the loan transferred into your name. Why? Because then you’ll be solely responsible for repaying the loan and settling the debt. Your ex will be freed from their payment obligations⁠—or discharged from their liability.

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