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Taking A Joint Home Loan Can Benefit You. Here’s Why – Forbes Advisor INDIA

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In India, buying a home is mostly the single largest investment made by an individual during their lifetime. As our families expand, we plan for the future and plan to invest in bigger homes that can comfortably accommodate and protect a growing family. However, such dream houses come at a significant cost, warrant access to huge funds, and hence, require key financial planning.

In most cases, individuals need to opt for home loans to fulfil the cost obligation associated with buying a house. Considering the amount and type of loan taken, there are certain eligibility criteria that one needs to be aware of before initiating applications. 

At the time of taking a home loan, your lender or you may wish to add another applicant, also called co-applicant, to your home loans for various reasons and the structure of having a co-applicant is referred to as a joint home loan. 

Let’s understand when and why should you take a joint home loan. 

Role of a Co-applicant in a Joint Home Loan

A lender while considering applications simply wants to check if the borrower can repay the home loan along with their household expenses and existing loans. Therefore, while calculating your eligibility they generally keep aside a certain fixed portion of your income that covers your existing expenses. An individual’s eligibility is decided on the basis of the discretionary amount left post calculating their interest repayments and monthly instalments. 

In a joint home loan, you can add another co-applicant or applicants who becomes liable to pay the home loan along with the primary applicant. Liability of the loan is a collective responsibility on both or all the co-applicants as well. Generally, immediate family members, including father, mother, spouse, children, and brother, are most eligible to become co-applicants in joint home loans. 

With such arrangements the question that mostly arises is whether the co-applicant is also the co-owner of the home being considered. Co-applicant or co-applicants may or may not be the co-owner of the property, however they have a liability to pay back the loan. The co-owner of the property is a joint owner along with other owners. 

As a safeguard and prudent underwriting practice, lenders ask all co-owners to also become co-applicants in home loans, however, the reverse need not be true. This is a decision the pros and cons of which should be carefully considered by the primary applicant while choosing joint home loans.

Why Choose a Joint Home Loan Over Any Other Loan 

There are a number of additional advantages in considering taking a joint home loan as compared to an individual home loan. These include higher loan amount eligibility, lower interest rates and other income tax benefits. 

Higher Loan Amount Eligibility: When you add an income-earning co-applicant to a loan, the lender considers the income level of all the applicants and calculates an eligibility amount higher than that of only one individual applying for a home loan. This allows applicants or families to take a larger home loan amount or purchase a more aspirational home since the room for increasing an applicant budget is possible. 

Lower Interest Rates: In order to avail lower interest rates individuals can add their spouses or mother as co-applicants for a joint home loan and as a joint property owner. This is useful as most lenders in India offer a lower rate of interest to women borrowers. It is up to 10 to 25 basis points lower than the interest rate for male borrowers. 

Tax Benefits: Tax benefits can be enjoyed by all the co-applicants separately. For this to happen, co-applicants should be property owners as well and should contribute to the payment of monthly instalments towards the repayment of the home loan. 

Income Tax benefits that are available to the all co-applicants include: 

  • Benefit under Section 80 C of the Income-Tax Act for the loan’s principal payment up to a maximum limit of INR 1.50 lakh per year. 
  • Benefits under Section 24 of the Income-Tax Act for interest paid on a home loan up to INR 2 lakh per year. 
  • In a joint home loan, both the applicants can claim the above amounts individually and use this as an effective tax planning tool

Co-applicants and first-time loan applicants can utilise the joint home loan as a great tool to improve their credit score, thereby easing the process for future loan applications as and when required for various other purposes. 

Necessary Documents Needed for a Joint Home Loan

Documentation is the most cumbersome and tiring part of taking any loan. However, it is a critical part of any lender’s operations as they would want to make sure that their borrower meets income eligibility and supporting documents are provided. 

There are a number of regulatory guidelines for the know your customer (KYC) and property-related documents, where it is imperative that all accurate documentation is shared to avoid unnecessary rejections and thereby delaying the availability of funds. 

For any home loan, typically an applicant needs to provide the following: –

  • KYC documents which include:
    • Identity Proof
    • Address Proof 
  • Income proof documents including but not limited to:
    • Salary slips, Form 16 issued by your employer or
    • Income tax returns (especially for self-employed) of the last three years
  • Property related documents such as: 
    • Agreement to sell, a sale deed or a registry 
    • Previous sale deed for the property (typically all transactions done on that property in the last 13 years) 
    • Few property or location-specific documents like a no-objection certificate (NOC) from relevant authorities or from your bank if the project is funded by any financer in case you are buying new property from a builder.

All applicants need to provide their KYC documents regardless of whether they earn an income or not or whether they even co-own the property. 

If you are applying for a joint home loan mainly for higher eligibility wherein the income of other applicants also needs to be considered, then income documents of all the applicants will be required to be shared with the lender in addition to KYC documents.  

If your purpose is to save on stamp duty charges by adding a female member of the house as a co-owner of the property, then you must make sure that the draft agreements and final sale deed or the registry documents have relevant members stated clearly as co-owners. 

If you are a nonresident Indian (NRI), you can issue a registered power of attorney (POA) in favour of a trusted family member for them to execute the necessary documentation on your behalf. However, you must ensure that the exact purpose of the required transactions are mentioned in the POA, thereby easing the process for compliance and reducing chances of rejection.

Factors to Consider Before Applying for a Loan

Before even applying for a joint loan, it is important to fully understand the lenders’ conditions, which differ depending on the provider you’re considering to approach. 

Lending Conditions

  • If the property has co-owners, in such a case, the lender, in all likelihood, insists all co-owners to become co-applicants as well. 
  • The lender may also insist any or one of your family members become co-applicants in the case of an NRI loan. 
  • If you have given the power of attorney to any of your family members, the lender is likely to insist one of the family members is available in the country as co-applicant for follow-ups and communication purposes to minimize repayment risks.

Credit Score Reports

It is always better to check your and the other co-applicant’s credit score and bureau report prior to applying. This will help to ensure that you are aware of all your past and current loans along with their performance over time. 

In some cases, if it is observed that you may have an old credit card with some minor payment overdue or incorrect reporting by any financial institution, it may lead to the possibility of hampering your overall credit score, reducing the chances of approval.

In India, there are primarily four credit bureaus via which you can check your credit report. Any bureau after paying relevant fees, which is about INR 500, will process your credit report. These credit bureaus include CIBIL, Equifax, CRIF Highmark and Experian.  

When to Avoid Taking a Joint Home Loan?

When a co-applicant already has significant loan obligations and is not left with sufficient income to be eligible for a higher home loan amount, it is generally advisable to reconsider taking a joint home loan and instead consider an individual home loan.

Healthy credit history is very important for lenders while considering applications and a co-applicant who has a bad credit history or poor track of repaying past loans is a major factor while assessing the eligibility of a new loan. 

If your income is sufficient to cover costs with no additional benefits available in terms of tax write-offs, it is suitable for you to avoid a joint home loan and keep the responsibility of your liability limited.

Joint home loans are also best avoided if there is a plan for taking on a larger liability or loan in the near future as the joint loan may impact the eligibility criteria of future loans due to existing liabilities.

Bottom Line

A joint home loan is a beneficial financial tool with the potential of helping the borrower secure higher loan amounts. 

It can aid individuals significantly improve their spending power and investing threshold while buying a larger and more comfortable home and at the same time keeping the primary applicant’s liabilities manageable by sharing the repayment burden with other co-applicants. 

If utilized correctly, it can help you enjoy higher tax benefits, while simultaneously reducing overall tax outgo on a yearly-basis. 

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How Do I Sell My Vehicle With Joint Ownership?

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A joint auto loan is when two borrowers have rights and responsibility to the same vehicle and loan. If you have a cosigner, then you, the primary borrower, have all the rights to the vehicle. Here’s what you need to know when you need to sell your car with two people responsible for the loan.

Selling a Joint-Owned Vehicle

Joint owners are typically spouses or life partners who combine their income to meet income requirements or get a larger loan amount. Both co-borrowers are responsible for paying the car loan and have 50/50 rights to the vehicle, so both their names are listed on the title.

Since your co-borrower has the same rights and obligations to the vehicle as you, you must get their permission to sell the car. In most cases, they also need to be present for the sale to sign the title. This may not always be the case, though, so it’s important to know how to read your car’s title.

If you have it, take a look at your vehicle’s title for the names listed on the back where you sign to transfer ownership. For example: let’s say your name is Jane and your co-borrower’s name is Joe. You’re likely to see either:

  • “Jane and Joe”
  • “Jane or Joe”
  • “Jane and/or Joe”

If you see “and/or” or the connector “or”, this typically means only one person needs to be present for the sale of the car. But if you see “and” this means both of you need to be present to transfer ownership – this is usually the case with joint ownership.

In all three cases, you still need the permission of the co-borrower to sell the vehicle even if they don’t have to be physically present to sign the title. If you sell it without the co-borrowers consent, it may be considered a crime because it’s their property, too. Moving forward, discuss the sale with your co-borrower to avoid potential legal trouble.

Selling a Car With a Cosigner

How Do I Sell My Car With Joint Ownership?If you have a cosigner on your car loan, then things become easier. A cosigner doesn’t have any rights to the vehicle and their name isn’t on the title. Their purpose is to help you get approved for the auto loan with their credit score, and by promising the lender to repay the loan if you’re unable to. A cosigner can’t take your vehicle, sell it, or stop you from selling it yourself.

However, it’s nice to let them know if you do decide to sell the car because the auto loan is listed on their credit reports. If you can, reach out to them about your plans to sell the vehicle. The car loan’s status impacts them and could affect their ability to take on new credit when it’s active.

If you sell the vehicle and the lien is successfully removed from the title, then you’re both in the clear.

Removing the Lien From a Vehicle’s Title

If you still have a loan on your car, then your number one priority is paying off your lender. Your lender is the lienholder, and you can’t sell a vehicle without removing them from the title – they own the car until you complete the loan. This typically means paying off the loan balance until naturally during the loan term, or getting enough cash to pay it all off at once from a sale.

When you’re selling a car with a loan, you want to get an offer for your vehicle that’s large enough to cover your loan balance and to remove the lien. If you don’t get a large enough offer, then you need to pay that difference out of pocket before you can sell the vehicle. Or, you may be able to roll over the remaining loan balance onto your next car loan if you’re trading it in for something else.

Looking to Upgrade Your Ride?

Many borrowers ask for help to get the car they need. If you need more income on your loan application to meet requirements, asking a spouse or life partner to chip in can do the trick. If you have a lower credit score, then a cosigner with good credit could help you meet credit score requirements.

But what if you want to go it alone on your next auto loan and your credit isn’t great? A subprime lender could be the answer. Here at Auto Credit Express, we’ve been connecting credit-challenged consumers to dealerships with bad credit resources for over two decades, and we want to help you too.

Fill out our free auto loan request form and we’ll look for a dealer in your local area that’s signed up with subprime lenders. These lenders assist borrowers with many unique credit circumstances to help them get the vehicle they need. Get started today!

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Fixed-rate student loan refinancing rates sink to new record low for the second straight week

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Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.

The latest trends in interest rates for student loan refinancing from the Credible marketplace, updated weekly. (iStock)

Rates for well-qualified borrowers using the Credible marketplace to refinance student loans into 10-year fixed-rate loans hit another new record low during the week of May 3, 2021.

For borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender, during the week of May 3:

  • Rates on 10-year fixed-rate loans averaged 3.60%, down from 3.69% the week before and 4.32% a year ago. This marks another record low for 10-year fixed rate loans, besting the previous record of 3.69%, set last week.
  • Rates on 5-year variable-rate loans averaged 3.19%, down from 3.23% the week before and up from 3.04% a year ago. Variable-rate loans recorded a record low of 2.63% during the week of June 29, 2020.

Student loan refinancing weekly rate trends

If you’re curious about what kind of student loan refinance rates you may qualify for, you can use an online tool like Credible to compare options from different private lenders. Checking your rates won’t affect your credit score.

Current student loan refinancing rates by FICO score

To provide relief from the economic impacts of the COVID-19 pandemic, interest and payments on federal student loans have been suspended through at least Sept. 30, 2021. As long as that relief is in place, there’s little incentive to refinance federal student loans. But many borrowers with private student loans are taking advantage of the low interest rate environment to refinance their education debt at lower rates.

If you qualify to refinance your student loans, the interest rate you may be offered can depend on factors like your FICO score, the type of loan you’re seeking (fixed or variable rate), and the loan repayment term. 

The chart above shows that good credit can help you get a lower rate, and that rates tend to be higher on loans with fixed interest rates and longer repayment terms. Because each lender has its own method of evaluating borrowers, it’s a good idea to request rates from multiple lenders so you can compare your options. A student loan refinancing calculator can help you estimate how much you might save. 

If you want to refinance with bad credit, you may need to apply with a cosigner. Or, you can work on improving your credit before applying. Many lenders will allow children to refinance parent PLUS loans in their own name after graduation.

You can use Credible to compare rates from multiple private lenders at once without affecting your credit score.

How rates for student loan refinancing are determined

The rates private lenders charge to refinance student loans depend in part on the economy and interest rate environment, but also the loan term, the type of loan (fixed- or variable-rate), the borrower’s credit worthiness, and the lender’s operating costs and profit margin. 

About Credible

Credible is a multi-lender marketplace that empowers consumers to discover financial products that are the best fit for their unique circumstances. Credible’s integrations with leading lenders and credit bureaus allow consumers to quickly compare accurate, personalized loan options ― without putting their personal information at risk or affecting their credit score. The Credible marketplace provides an unrivaled customer experience, as reflected by over 4,300 positive Trustpilot reviews and a TrustScore of 4.7/5.

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Provident Financial calls time on doorstep lending business

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Provident Financial has confirmed plans to shut its 141-year-old doorstep lending arm, as its full-year results highlighted the strain the coronavirus pandemic and growing customer complaints have put on subprime lenders.

The Bradford-based company reported a pre-tax loss of £113.5m for 2020, compared with a £119m profit the previous year. The biggest drag was a £75m loss in its consumer credit division, which includes home credit.

Malcolm Le May, Provident chief executive, said: “In light of the changing industry and regulatory dynamics in the home credit sector, as well as shifting customer preferences, it is with deepest regret that we have decided to withdraw from the home credit market.”

Jason Wassell, chief executive of the Consumer Credit Trade Association, which represents alternative and high-cost lenders, said the decision showed that “the current regulatory framework does not work for the market, or its customers”.

“The result in this case is that access to credit will be reduced for hundreds of thousands of people.”

Provident built its name as a provider of home credit, or doorstep lending, which involves a team of local agents who regularly visit borrowers to collect repayments and discuss their products.

Proponents believed agents’ local expertise and personal relationships with borrowers allowed them to achieve better results than traditional bank lending to people with bad credit scores, but the approach has increasingly been superseded by digital models in recent years.

Provident’s business has also been affected by a series of self-inflicted and external difficulties. Its consumer credit division has been lossmaking since a botched effort to modernise the unit in 2017, which led to a pair of profit warnings and an emergency rights issue. More recently, its recovery has been hampered by an increase in customer complaints that prompted an investigation by the Financial Conduct Authority.

The complaints rise has been driven by professional claims management companies, echoing a broader trend across the subprime lending industry which has also affected companies such as Amigo, the guarantor lender. Executives also accuse the Financial Ombudsman Service, which adjudicates on customer complaints, of overstepping its mandate and encouraging huge volumes of complaints.

Provident said it would wind down or sell the consumer credit division, with either option expected to cost it about £100m. 

The move will see Provident exit the most controversial areas of high-cost credit to focus on what it describes as “mid-cost” lending through its Vanquis credit card business and Moneybarn vehicle finance arm. Vanquis and Moneybarn both remained profitable during 2020, despite more than a quarter of Moneybarn customers requesting payment holidays at the height of the pandemic.

The results were slightly better than average analyst forecasts, and the company said Vanquis and Moneybarn had both reported “improving trends” during the first quarter of 2021. Shares in Provident nonetheless dropped more than 10 per cent in early trading.

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