What is a joint loan?

A joint loan is exactly what it sounds like- it's a loan taken by two applicants rather than just one.

A joint loan is a good option for those who want to share the divide the financial burden, or don't have a good CIBIL score to apply them.

If you are unable to obtain a home loan yourself, then you can take the help of your spouse or a family member by making them a co-applicant of the home loan. If their credit score is good then your lack of the same will be balanced and the chances of getting a home loan will also improve greatly.

What are the advantages of joint loans?

Joint loans can have a number of advantages in certain situations. Some of these are:

• Benefit of Numbers: A bank or financial institution is more comfortable to sanction when there are two applicants than just one. This is because even if one of the co-applicants fails to repay the loan they can contact the other one easily.
• Making up for Low CIBIL score: Many people apply for joint loans with a person who has a high CIBIL score to make up for their own poor credit score.
• Divided Burden: In a joint loan the liability lies with both co-applicants. Since a joint loan such as a home loan can be a huge responsibility, it is sometimes a good idea to share it with another person.
• Tax Benefits: All the co-applicants can claim tax deductions under Section 80C of the Income Tax Act against principal repaid and Section 24 against the interest repaid. However, the tax benefits are in the proportion to the share that the co-applicants have in the loan.

Things to Remember

Obviously, joint home loans have their own advantages. However, this doesn't mean you should apply for one impulsively. There are a few things that you must be aware of before you make any decision. These are:

• Negative Impact: Joint home loans should be taken with caution. This is because if you or your co-applicant doesn't pay the EMIs on time in the future, or default altogether then the negative impact will be borne by both of you. The credit scores of you both will drop and it is possible that getting another loan in the future becomes almost impossible.
• Assets: If your bank has attached some assets, such as anther house with the loan, then it could seize it even if it's your co-applicant who has defaulted.
• In an Event of Death: If in an unfortunate event your co-applicant passes away, then you may have to bear the entire cost of the loan yourself.

All in all, while it's true that joint home loans are risky, if your co-applicant has a good CIBIL score and are trustworthy, then there is no harm in applying for one. However, be sure to check your CIBIL score. You can easily get your free CIBIL score from the official CIBIL website once a year. If your score is low then can also improve it with time. It can help you if you want to get a home loan in the future without adding another co-applicant.

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