Whether it’s to refurnish your house, finance a wedding or meet medical expenses, there is an alternative to dipping into your savings. Loans help in lessening your financial burden.
However, in cases where the applicant is eligible for a smaller loan that they desire, they can apply for a joint loan. It can be with their spouse, business partners, relatives or friends.
Here, we’ll discuss everything about the joint account loan application so that you get a good idea about this smart loan option. Let’s begin!
What is a joint loan account?
A joint loan account is a credit account that allows you to take a loan with another individual. Both of you can apply, utilise and repay the loan jointly under this type of account. Both you and your co-applicant share ownership and responsibility for the debt.
You can apply for a business, home, or even a personal loan through joint accounts. They work the same way as a regular account does. Only here, there are two applicants to the loan who can access, benefit and repay the loan.
Why should you take a joint loan account?
As standards of living increase and financial needs with them, a joint account loan application proves to be a great financial tool. Here are its benefits.
#1 Higher loan amount
Your financial institution has to consider many factors while studying your loan application. Most important among them is your salary and creditworthiness, which is determined based on your credit score. Based on this, they determine the maximum loan amount you’re eligible for.
So, if you want a loan amount beyond that, applying for a joint loan is the way to go. This is because, under a joint account, the financial institution studies the creditworthiness of both applicants. Both incomes and credit scores are considered, which results in you getting a significantly larger loan amount.
#2 Ease of repayment
Applying for a joint loan means affordable repayment of debt. Both applicants share the responsibility to pay back the principal amount with interest. Hence the burden on one person is lessened.
For instance, you and your co-applicant apply for a 30 Lakh personal loan via a joint account. And the financial institution grants 20 Lakh based on your profile and 10 Lakh based on your co-applicant’s. This translates into a 2:1 ratio. So, if the EMI is Rs 30,000, you would have to contribute Rs 20,000, and your co-applicant would bear the rest.
#3 Tax benefits
Lastly, joint loan accounts attract tax benefits for both applicants. And you can receive additional tax relief if your co-applicant is your spouse.
For instance, you and your spouse apply for a joint home loan. Under the Income Tax Act 1961, each co-owner who is also a co-applicant in the loan can claim tax deductions of up to Rs 2,00,000 for interest on the home loan in their income tax returns. Thus, applying for a joint loan gives you tax benefits as well.
Points to keep in mind
Before you open a joint personal loan account, you must decide on a co-borrower. And to find a suitable one, ask yourself the following questions.
#1 Do you know your co-applicant well?
You must apply for a joint personal loan only with someone you’ve known for a long time. This ensures you won’t have any unpleasant surprises later.
Knowing your co-applicants spending habits, income, future goals, and the like is essential. This helps you determine whether they are suitable for becoming a co-applicant.
#2 How is their credit behaviour?
Your co-applicant’s credit behaviour must be considered before you apply for a loan with them. This will affect your application and chances of getting the loan.
Your loan application can be denied if they have defaulted in repayment or failed to pay their credit card bills on time. On the other hand, if approved, you might face issues down the line if they tend to default.
#3 Do they have assets that might help in an emergency?
While income and job stability are essential, it is also vital to enquire whether your co-applicant has additional assets that might be helpful during an emergency.
If one or both of you lost your jobs due to unforeseen reasons, you would be required to sell your assets to help repay the joint personal loan. Hence, knowing your co-borrower’s asset position is critical.
To sum up
Applying for a joint loan is a great way to finance big-ticket purchases without straining your purse strings. With the right co-applicant, you can get access to a larger loan amount without added stress. But before you fill out your joint account loan application, you must decide one more thing.
And this is which financial institution to apply for a joint personal loan with. We at Tata Capital offer joint personal loans at attractive interest rates with fast approvals. So, don’t put off your dream life anymore, and partner with us!
To learn more, visit our website and apply for a loan today!