How to manage loans if both husband and wife are working?

Marriage is all about mutual understanding, sharing and respect. A marriage cannot be successful if husband and wife do not work in tandem. Financial planning and management plays a major role in ensuring the success of a marriage, more so if both husband and wife are working. For financial discipline, there should be a mutual agreement on how to jointly manage savings, expenditures, loans and liabilities.

Managing assets and liabilities are important for any household as one financial mistake may affect your spouse’s credentials. Let us understand this with the help of an example:

Raghav and Ragini Khanna applied for a joint home loan recently. Their combined salary increased their loan eligibility considerably and they looked forward to approval of their loan by the bank.

However, to their dismay, their loan application got rejected. Raghav was informed by the bank that his wife’s credit report showed outstanding dues on an old credit card which she was no longer using. The adverse credit report had a negative impact on their loan prospects.

Thus, we see that right from filling up loan application till the payment of last EMI, a couple should plan out the modalities properly so that the loan is managed properly.

Availing joint loan

If you belong to the DINK (double income and no kids) category, you can easily apply for a joint loan as your combined income will improve your purchasing power significantly. This will help you become eligible for a higher loan amount. Normally, banks fund 80 per cent of the cost of the property.

Suppose you want to buy a property worth Rs 50,00,000. For this, you will have to take a loan of Rs 40,00,000 (80 per cent of the property cost). If you are getting the loan at 10 per cent interest rate for a tenure of 20 years, your EMI will be Rs 38,601.

Assuming that your monthly salary is Rs 45,000 and your wife earns Rs 35,000 a month, you can avail a joint loan to be eligible for a home loan of Rs 40,00,000.

Don’t ignore credit score

You should not ignore your credit score. Husband and wife must individually have a good credit score for approval of loan. If you spouse has a poor credit record, chances are that you may be denied a loan.

How to manage loans jointly

Here are a few tips for couples to manage their loans:

• Both husband and wife should calculate their income, expenses and existing loans and share information about all sources of income. This will help in better management of loan repayments.
• You should share your credit report with your spouse and also know his/her credit score. Focus on outstanding dues with high interest and foreclose such loans to improve your report.
• Evolve a system for loan repayment. Husband and wife may share EMIs as per their convenience. Flexibility of sharing EMI is a big relief as the loan burden gets divided.
• One of the reasons why husband and wife should opt for a joint loan is that tax liability goes down to a significant level. You and your spouse can avail tax benefits separately, which is up to Rs 1.5 lakh on principal and Rs 2 lakh on interest component.