Applying for a home loan, personal loan or education loan jointly with a spouse or a parent has become increasingly common.
A joint loan can help increase your loan amount, reduce EMI pressure and improve approval chances — but it can also create shared liabilities that may affect the entire family.
Before signing a joint loan document, it’s essential to understand whether it truly benefits you.
Here’s a complete breakdown.
What Is a Joint Loan?
A joint loan is when two people apply for one loan together.
Both co-applicants share:
EMI responsibility
Liability for defaults
Credit score impact
Loan ownership benefits
Common joint loan types:
✔ Home Loan
✔ Personal Loan
✔ Education Loan
✔ Car Loan
Most joint loans involve spouse, parents, or sometimes siblings.
Pros of Taking a Joint Loan
1. Higher Loan Eligibility
When two incomes are combined, the bank approves a higher loan amount.
Useful for:
Buying a bigger home
Reducing down payment
Getting better property options
2. Lower EMI Burden
If both contribute, monthly EMIs become easier to manage.
Some families split EMIs 50-50.
3. Better Approval Chances
A co-applicant with stable income or strong credit score increases approval probability, especially if your credit score is low.
4. Tax Benefits (Specifically for Home Loans)
If both co-applicants are co-owners:
Each can claim tax benefits on principal (Sec 80C)
And interest (Sec 24)
This can reduce total tax liability significantly.
5. Stronger Financial Backup
If one borrower faces job loss or illness, the other can temporarily handle EMIs.
This reduces the risk of default.
Cons of Taking a Joint Loan
1. Both Are 100% Liable
Even though two people share the loan, each one is fully responsible for EMI payment.
If your spouse or parent misses their share — YOU must pay the entire EMI.
2. Credit Score Risk for Both
Any one of these situations will damage both credit scores:
Late EMI
Missed payment
Outstanding dues
Default affects the entire household financially.
3. Emotional & Family Conflicts
Money + family = friction potential.
Disagreements about EMI contribution, sudden financial changes or loan burden can strain relationships.
4. Reduced Loan Eligibility in Future
Banks consider existing joint EMIs while approving new loans — even if YOU are not paying them.
This reduces personal loan or credit card eligibility later.
5. If One Applicant Dies, Liability Stays
The surviving borrower must continue full EMI payments.
Unless you have credit life insurance, this can become a major financial shock.
Joint Loan: Spouse vs Parents — Which Is Better?
Joint Loan With Spouse
Best When:
✔ Both are working
✔ Stable dual income
✔ Buying a home together
✔ Looking for tax benefits
Risk:
Marital disputes or job loss can complicate repayment.
Joint Loan With Parents
Best When:
✔ Parents have stable pension/income
✔ You need higher loan eligibility
✔ Parents want to be co-owners of property
Risk:
If parents are older, banks may:
Shorten tenure
Increase EMI
Increase insurance cost
Also, liability may fall entirely on you if they cannot pay.
When You SHOULD Take a Joint Loan
✔ Buying a home where both will share ownership
✔ Both incomes are stable
✔ Credit score needs strengthening
✔ You want maximum tax benefits
✔ You need higher loan eligibility
When You SHOULD NOT Take a Joint Loan
✘ If the co-applicant has unstable income
✘ If their credit score is poor
✘ If you expect difficulty in repaying EMIs
✘ If the co-applicant is elderly
✘ If taking higher loan will strain your finances
FAQs
Q1. Does taking a joint loan improve loan approval?
Yes, combining two incomes increases approval chances.
Q2. Will default by one person affect the other?
Absolutely. Both credit scores will drop.
Q3. Can we split EMIs?
Yes, but banks treat the loan as a shared 100% responsibility.
Q4. Do both applicants get tax benefits?
Only if both are co-owners of the property.
Q5. Is a joint loan mandatory for higher home loan eligibility?
Not mandatory, but often the easiest way to increase eligibility.
Published on : 15th November
Published by : SMITA
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