Purchasing a home is a major financial commitment, and a joint Home Loan can be a convenient solution to share the financial responsibility. It also comes with additional advantages, such as potential tax deductions. However, before applying for a joint loan, it is important to understand how it may impact your CIBIL score over time.
What is a Joint Home Loan?
A joint Home Loan is a secured loan availed of and repaid by two or more individuals to jointly finance the purchase of a property. Typically, the financial co-applicants for a joint Home Loan are family members, such as parents, spouses, offspring, or siblings. Financial institutions and banks allow up to six financial co-applicants for a housing loan provided they all are co-owners of the concerned property.
Factors that Impact Your Credit Score with a Joint Home Loan
A joint loan affects the credit history and CIBIL score of both borrowers. It reflects on the applicant’s credit report. Here are a few ways that your Home Loan credit score gets affected:
Default in Payments
While a joint loan supplements the borrower's income and increases their credit limit and loan eligibility, one should know that if the co-applicant fails to pay the EMI, it will certainly reflect in your credit report and negatively affect your Home Loan credit score.
Reduced CIBIL Score
If your co-applicant delays or skips payment on time, it will lower your CIBIL score as well. While the CIBIL score ranges 300 to 900, lenders usually demand a score of 750 and above to consider you eligible for a loan. Defaults in payments can get your score to stoop down significantly below 400-500, which again, can lead to the loan application being rejected.
Negative Effect on Credit History
If your co-applicant misses or delays payments, it can impact your credit report, as lenders may view it as a sign of financial instability. A bad credit history can raise concerns about a borrower’s ability to manage repayments, potentially affecting your Home Loan eligibility and credit score as well.
In conclusion, while a joint Home Loan offers shared financial responsibility and benefits, it is important to understand that any missed payments by a co-applicant can negatively impact both borrowers' CIBIL scores and credit histories, potentially affecting future loan approvals and financial stability.
FAQ'S
A joint Home Loan impacts the credit score of both co-applicants. Timely repayment can improve both applicants' credit scores, while missed or delayed payments can lead to a reduction in the CIBIL score.
If one co-applicant defaults on the Home Loan EMIs, it will negatively impact both co-applicants' credit reports and lower their CIBIL scores.
