Investments As A Couple

By | February 4, 2017

Getting A Car Loan Together

Investments As A Couple

Doing things together is fun. Your first date was fun. So was your first vacation. What about that first time you bought gadgets together? So, shouldn’t buying your first car be fun too? It will be if you do it together! There are many advantages to putting your finances together to buy your first car. Here’s a couple who did it. They tell you all about it.

Rekha and Raman, techies in Chennai, just got married and wanted to get their dream car. Since they were looking at a luxury sedan worth Rs. 25 lakhs, they wanted to take a joint loan. Says Rekha, “The bank that we approached was offering lower interest for women. So, I decided to apply for the loan, with my husband as a co-applicant. This way, we could enjoy lower interest rates and higher eligibility.” If you too want to go for a joint Car Loan, with your spouse, here are the advantages you can enjoy.

Additional reading: 7 Things To Consider Before Applying For A Car Loan

  • Higher down payment – When you take a loan together, you can put together both your savings to make a higher down payment on your loan. A higher down payment will mean a lower interest outgo.

Consider this: For a car worth Rs. 25 lakhs, if you make a down payment of Rs. 5 lakhs, your EMI will be Rs. 32,179, assuming an interest rate of 9%. Suppose you make a down payment of Rs. 8 lakhs, you will have a saving of Rs. 1,05,445 on interest payments and your EMI will be Rs. 27,352. Also, note that most banks only provide loans up to 100% of the ex-showroom price of the car. So, you might have to shell out quite a bit anyway.

  • Higher eligibility – Most banks are very particular that your debts put together should not exceed 50% of your take-home pay. So, in case you have many other loans running, you might want to consider applying along with your spouse. Having a co-applicant will mean higher eligibility and greater chances of getting that loan approved.
  • The ‘Woman’ advantage – Most Public Sector Banks (PSB) and some of the private ones offer special interest rates for women customers. Though the interest rate differential might seem less, you can save quite significantly. Consider this: When you take a loan for Rs. 15 lakhs at 10% interest, you will need to pay total interest of Rs. 5,91,749. Suppose you are offered an interest rate of 9%, you can save as much as Rs. 64,525 on your interest.
  • Paying it back together – When you take a loan together, you can make plans to pay it back together. It is easier to set aside money from each of your salaries every month for the EMI. Ideally, you can have a joint account to which you can transfer money every month and set up an auto-debit on the joint account to pay the EMI.

Joint Home Loan Anyone?

Investments As A Couple

Buying a home is always exciting and you will want to ensure that everything goes right. A Home Loan rejection will surely put a spanner in the works. That is why going for a joint Home Loan might help.

Take the example of Evangeline and Peter who are a working couple with a kid, and living in Bangalore. Peter applied for a Home Loan which got rejected because they had other loans like a Personal Loan and Car Loan. That’s when they decided to go for a joint Home Loan. Says Peter, “When we applied for a joint Home Loan, the eligibility was no issue at all. And since my wife’s Credit Score was better than mine, the application went through and we got the Home Loan.” There are several advantages to taking a joint Home Loan.

Additional Reading: Why Your Home Loan EMI Is Still High

  • Higher eligibility – Just like any other loan, for a Home Loan too, when you add a co-applicant who is earning, your eligibility will be higher.
  • Higher down payment – The higher the down payment, the lower will be your interest outgo. So, ensure that you put in your savings to make the down payment. If you are applying with your spouse, you can pool your savings together to make a higher down payment.

Consider this: When you take a Home Loan for Rs. 30 lakhs for 20 years at 9%, your total interest outgo will be Rs. 34,78,026. Suppose you make a down payment of Rs. 10 lakhs, your interest outgo will go down to Rs. 23,18,684; savings of a whopping Rs. 11,59,342. Remember, banks fund only up to 90% of the value of your home.

  • Difference between co-borrower and co-owner – A co-owner is one who owns the property along with another. A co-borrower is one who is a co-applicant for the Home Loan. Note that in case of joint Home Loans, most banks insist that every co-owner should be a co-applicant. Even if the applicant doesn’t have any income, the co-owner is still taken as a co-applicant.
  • Double tax-benefits – The best part about a joint Home Loan is that both of you can claim tax benefits on it. On both interest and principal repayment? Yes! So, Rs. 1.5 lakh under Section 80C and Rs.2 lakhs under Section 24. The tax benefits will be in the proportion in which you own the property. Want tax benefits for yourself? Get a second home. This way each of you will have a home for claiming tax benefits. Also, for a let-out property, the tax benefit on interest repayment is unlimited (as of FY 2016-17). You read that right!
  • ‘The Woman’ advantage – Several banks provide lower interest rates for Home Loans taken by their women customers. For example, SBI has the Her Ghar scheme for women customers where interest rates start at 8.6% presently while other borrowers need to pay over 8.7%.
  • Credit Score advantages – This is one of the best advantages. In a joint loan, when one applicant’s Credit Score is not great, the other person’s Credit Score (if it is good) will be used to grant the loan. What’s more? Once you have the loan in both your names and you start repaying regularly, the one whose Credit Score is low will notice that their Credit Score improves over time.

Living together, not married but looking for a joint Home Loan? That’s a toughie! Most banks provide loans only to married couples or siblings. Some banks might, at their own discretion, provide loans to long-time customers who want joint loans but are not married. Be ready to hear a big NO if you are living together and want a joint Home Loan.

Joint Life Insurance – Benefits Galore

Investments As A Couple

Life Insurance is a must when you start earning and especially after you have a family. It is always better to opt for a joint Life Insurance policy instead of having a single policy for each family member. Joint Life Insurance is where both you and your spouse are covered under a single policy.

Here’s an example of how a joint Life Insurance can help. Sandhya and Prashant got married a year ago and live in Pune. When Prashant approached an insurance firm, he found that a one crore cover cost him Rs. 24,000 per year if they wanted to purchase 2 policies. However, if he went in for a joint life policy, it was only about Rs. 19,000 per year. So, Prashant decided that he would go in for a joint life policy. Want to know the advantages of having a joint life policy? Read on.

Additional Reading: Your Guide To Joint Life Insurance

  • Lower premiums – As we mentioned earlier, a joint life policy can cover two lives at a much lower cost when compared to two single life policies. The savings can be quite significant.
  • Choose right – Many policies have a clause where there will be only a single payout after the death of one of the spouses and there ends the policy. This is often known as joint-life term plan. However, there are policies that offer life cover to the surviving spouse. There are some other policies that provide a premium waiver to the surviving spouse so that the policy can be used to cover them. There are also a few policies that provide a regular income to the surviving spouse. These types of policies are known as joint endowment policies. So, you need to choose the one that will suit your needs after looking at the features.
  • Riders thrown in – Several policies provide riders such as accident death rider and critical illness rider along with the policy. Aegon Life iSpouse Insurance Plan has an inbuilt accidental death benefit rider where an additional 50% of sum assured will be paid out to the surviving spouse. If a spouse is diagnosed with a critical illness, you will receive 25% of the base sum assured.
  • Tax Benefits – You can claim tax benefits under Section 80C for the premium paid. However, only the spouse that pays the premium might be able to claim the tax benefits.

Why Take A Personal Loan Together

Taking a joint Personal Loan will give you benefits very similar to taking a joint Home Loan and will include higher eligibility, Credit Score advantages and special interest rates for women customers. Apart from this, there is one other advantage that a couple discovered.

Reena and Shankar work in Mumbai and have been married for 4 years now. They had taken a Personal Loan when they got married and needed some more funds to renovate their home a few months ago. One of their friends suggested that they get a top-up on their Personal Loan. Since the loan had been taken jointly, they applied for a top-up on the same loan. Says Shankar, “Since I had taken many other loans after that, my eligibility was low. However, based on Reena’s eligibility we were given a top-up on the previous loan. We have never missed a single payment till date and that helped us too.” As you can see, getting a top-up on your Personal Loan is easy if you take a joint loan.

Additional Reading: Everything You Need To Know About Personal Loan Refinancing

All set to discover the joys of doing things together? Go ahead and choose the best financial products. But ensure that you include your spouse at every stage. They can give much more than just their opinion!

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Category: Money Management

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