Benefits Of Making Women A Co-Borrower In The Loan

Including women as co-borrowers when taking loans such as mortgages or business loans has several advantages for both the family and financial institutions.

It allows both parties in a relationship to share responsibilities for repayments and qualify for certain tax benefits. Being a co-signer also helps women establish their own credit history and financial independence over time.

Read below to find out more about the benefits of making women a co-borrower during the loan application process.

How Can Women Become Co-Borrowers?  

Women in India can become co-borrowers when applying for loans along with their spouses or other family members.

Usually when taking a home loan or loan against property, banks allow adding a co-applicant to the application. This gives women the opportunity to share responsibilities of loan repayment and also helps them build credit history. Let’s see how does this work?

Tax Benefits For Co-Borrowers

Under section 80C of the Indian Income Tax Act, principal repayment on housing Loans is eligible for tax deduction up to Rs. 1.5 lakhs annually. When a woman is made the co-borrower, she too, is eligible to claim this tax exemption on the principal amount repaid. So for a married couple, the total tax benefit goes up since both can claim the deduction separately.

Easier Loan Approval And Lower Interest Rates 

Banks consider applications with more than one borrower to have lower risk compared to a single applicant. This is because there are two sources of income now responsible for loan repayment instead of one. 

Banks may give preference to applications with female co-borrowers to meet their lending targets and diversity quotas. Co-borrowing often results in an easier Loan apply process and lower interest rates for the borrowers.

Builds Credit History And Financial Independence

When a woman is the co-borrower, she is equally responsible as the main borrower in ensuring timely repayment of EMI (equated monthly instalments). This helps establish her creditworthiness. Her CIBIL score increases with positive repayment behaviour over time.

 A good credit score gives women more say and options when independently applying for loans in future. It fosters financial autonomy instead of only being a nominee.

Protects Family Assets In Case Of Uncertainties 

Unforeseen events like job loss, illness or death of the main borrower can put family finances and assets in jeopardy if a loan has only one person as the borrower. Shared responsibilities as co-borrowers ensure the family house or property kept as a guarantee against the Loan is safe even if one borrower faces hardships in repayment. Banks find joint applications more secure due to reduced risks of loan default.

Eligibility For Higher Loan Limits And Subsidies

Some loan schemes and subsidy programs provided by the government and banks mandate lending only to women or jointly to women. For example, the Pradhan Mantri Awas Yojana promotes women owning houses by offering higher limits on home loans when they are co-borrowers. Joint ownership makes families eligible for such targeted benefits.

Promotes Financial Inclusion Of Women 

Despite economic growth, women in India have much lower rates of bank account ownership and access to formal lending compared to men. Putting women as co-borrowers aims to raise their participation.

This boosts financial literacy while also strengthening their stake in major assets. Expanding women's roles and choices in money matters contributes to wider social and household decision-making powers. 

Conclusion

From a legal standpoint, including women as co-borrowers in loans gives them equal rights over the loan and properties kept as collateral like houses or land. It boosts inclusion, risk profiling and affordable access to funds.Overall, the socio-economic benefits for families clearly outweigh the potential drawbacks of increased responsibilities. 

To learn more about co-lending by banks and NBFCs, you can read this RBI notification.