Applying for a home loan jointly is the best way to approve a home loan. Banks and NBFCs insist on taking joint loans to reduce their risk. Loans are offered to women at concessional rates. Borrowers are lured by banks that they can avail interest at lower rates on higher loan amount. But you should jointly evaluate the benefits and disadvantages before applying for the loan. Therefore, through this article, we are going to give you information about the advantages and disadvantages of taking loans jointly.
Benefits of taking home loans jointly
There are several benefits of taking a home loan jointly, some of which are –
High loan amount
When you jointly apply for a home loan, it increases the chances of loan approval. Also, due to long term loans, the borrower wishes to avail of the loan at a discounted rate. Thus when you apply jointly, the loan is more likely to be approved if you fulfill various eligibility criteria. Applying for a loan jointly means that your income will be better than singles and a good credit score. Thus when you apply with a qualified co-applicant, the chances of getting a higher loan amount are increased compared to a single.
More tax benefits
We know that there is a tax benefit on taking a home loan. You can avail tax benefits under Section 80C and 24B of Income Tax Act. Under these sections, both tax and interest repayment benefits are available. This way, if you take a home loan jointly, you can get double tax benefits. If you and your spouse apply for a home loan, both of you are eligible to avail tax deduction under sections 80C and 24B. Thus your total tax liability is reduced.
Women borrowers get rebate in interest rate
Most of the public sector banks offer concessional rates to women borrowers taking home loans. These rates are usually around 5bps lower than the standard home loan rates offered by the lender. This benefit is provided to women borrowers. Meaning if your co-applicant is a woman, you can take advantage of it. Along with this, the co-applicant should be the sole or joint owner of the property and the loan should also be the main or co-applicant. Most lenders usually offer such benefits.
Flexibility in repayment
You can avail higher loan amount by taking a joint loan. Also, in this type of loan, it is not necessary that both the applicants contribute equally to repayment of the loan. Applicants can contribute towards repayment of loan based on their convenience and income. The co-applicants can decide among themselves how much of the principal amount and interest repayment both want to contribute.
Disadvantages of jointly taking home loan
Sometimes taking home loan jointly is not the best option. There are many types of losses when taking a joint home loan, which are as follows –
Effect on credit score
You should not apply for a home loan with someone who does not have a good repayment record and has a low credit score. The home loan taken jointly allows both applicants to decide the repayment accordingly. Also you get a loan at a lower rate of interest. But if for some reason your co-applicant is unable to pay the EMI, the other has to pay the entire loan. This affects the credit history of both applicants equally.
The documentation and verification process takes time
This type of loan has more than one applicant, so the application takes longer to process. Banks usually take longer to complete the verification process of a joint loan. Processing of joint home loans takes time due to extensive verification process. Through the verification process, lenders ensure that both applicants have provided authentic documents or not as well as verifying their CIBIL. The loan rate is then determined based on the income and repayment capacity of both applicants. Apart from this the whole process is also cross-checked, due to which the whole process takes a little longer.