Outlook Money
If any loan is co-borrowed by individuals, then the repayment is collective, however, it can be a risk as well and if one fails to repay, the other gets into trouble.
1. If one borrower fails to repay the, the bank holds the other borrower equally responsible for the default.
A delayed EMI by a co-borrower can have a bad impact on the credit score. It can reduce the chances of getting future loans or credit cards.
Lenders can also file legal cases or initiate recovery proceedings. This includes collection agents contacting borrowers, issuing legal notices, or even seizing jointly owned assets if the loan was collateralised.
In case the borrower goes missing or dies, the obligation then remains on the other borrower to pay. It can also lead to legal considerations.
Although as per the laws, one is obligated to return the entire loan but however, legal help can be taken against the faulty co-borrower for recovery of your excess payments.
Before signing a loan agreement, it is important to understand the other party’s financial habits and repayment capabilities.
Once a joint loan is sanctioned, it becomes difficult to cancel the name. However, it is done through refinancing or balance transfer of the loan in an individual’s name, as approved by the lender and subject to the repaying capacity of the remaining borrower.