What is Joint Credit?

Joint, in legal terms, describes a contract where two or more individuals act together in a financial transaction. Joint credit is mutually issued credit to parties of two or more individuals or organizations. This type of credit is granted to all parties equally, based on their combined income, assets and credit background. The individual parties take equal responsibility for repaying the debt that they have been granted together.

Joint liability is the obligation of all parties who have been granted joint credit to repay the debt. The parties agree to share the risks that are associated with being granted the credit. Applying for and being approved for joint credit also means being responsible and liable for the risks and benefits including lawsuits, litigation and payoffs for any debts associated with the credit.

Combining credit is common with individuals as well as businesses. Parties often act together rather than individually for various financial reasons. Business ventures, bank accounts, credit cards and property are among some common examples of situations where credit is applied for jointly.

Businesses may act in joint business ventures that are essentially joint credit contracts. A joint venture is an agreement to share income, shortfall and financial power in businesses that also share a common goal. This is one way that businesses may combine efforts and finances without having to formally merge as one company. Each entity is responsible for sharing the profits as well as the debts that are associated with the credit in a joint business venture.

Individuals may decide to apply for joint credit in a variety of different ways. Individuals often apply jointly for loans, credit cards and mortgages. Applying for and being granted joint credit means that the responsibility of repaying the debt remains the shared responsibility of all parties regardless of emotional or physical separation. Divorce, separation or breaking up does not relieve parties of the joint responsibility of repayment of their financial contracts.

Individuals who want to change the circumstances of their credit agreement while they have active debt must negotiate the terms of those responsibilities. The ways in which joint credit contracts are negotiated will depend on the parties involved and the arrangements that can be made to satisfy the debt. The parties who have agreed to repay the debt are still equally responsible for satisfying any repayments unless there are successful legally binding financial negotiations to change the ownership of the debts.