Today, many people apply for a joint home loan mainly to increase their eligibility and get a higher amount. Read on to know more about the important things to consider while applying for a joint loan.
For many Indians, buying a home is one of their biggest aspirations. And, most of them rely on availing a home loan to get the funds for buying their dream home. If you are looking to apply for a home loan, you would know that every lender has their own eligibility criteria and they decide the maximum amount they can lend based on a few critical factors like income, profession, age, credit score, etc. And, if you don’t meet their requirement, you may not get the amount you apply for. This is where applying for a joint home loan can be handy.
But, before you opt for a joint loan, it is advisable that you understand the different aspects of loan, which are discussed below:
- Understand the implications
A joint home loan is usually taken to meet the lender’s eligibility requirement by adding the co-applicant’s income and avail a higher loan amount. You can consider applying for a joint home loan with either your spouse, parents, sibling or any other earning member of the family.
Applying for a joint loan is a convenient approach to be able to afford buying a bigger home and manage the repayment of the loan jointly. However, you must know that while the joint loan increases your eligibility, it also has a significant impact on the credit score and the credit history of both the borrowers. Therefore, it is vital for both the applicants to understand their responsibilities of the loan and its impact on their financial credentials.
- Understand the responsibilities of a co-applicant
In a joint home loan, a co-applicant refers to a person who applies for a loan along with the primary applicant. This is mainly done so that the co-applicant’s income is added to the borrower’s profile and increases their credit limit. As a co-applicant, you will be held equally responsible for the payment if your partner fails to pay back or default on the repayment.
Even a single missed payment by the other borrower would impact your credit score. In fact, the borrowers typically assess the co-applicant’s credit report thoroughly to know their credit history and past repayment records. And, if the co-applicant’s credit score is low or does not meet the lender’s benchmark requirement, there is a high probability that your loan application will be rejected.
- Sufficient income
Before applying for a joint home loan, both the applicants must ensure that they have a steady income. You cannot rely on a single person’s income for repaying the amount. If something happens to you or if you lose your income, the repayment burden will automatically fall on the co-applicant. So, it is advisable to choose the co-applicant carefully and apply for a joint loan with an earning member so that both can contribute towards repayment. This will also help you repay the amount on time without feeling the burden.
- Tax benefit
One of the most significant benefits of applying for a joint home loan is that both the applicants are eligible for availing tax benefits. You can enjoy deduction up to Rs. 1.5 lakhs in a financial year on repayment of the principal amount under Section 80C of the Indian Income Tax Act. Also, you can get a deduction up to Rs. 2 lakhs on the interest repayment.
Applying for a joint home loan is an excellent way to increase your loan eligibility and get a higher amount. But, you must be aware of its implications and understand the legal and financial nuances associated with it.