You Are Both Equally Responsible From Day One
In a joint loan, both the primary applicant and the co-applicant are equally and fully liable for repayment. The lender does not split the debt – if one party stops paying, the other must cover the entire EMI immediately without exception.
The Lender Holds You 100 Percent Liable
When a co-applicant defaults, the bank does not pursue them alone. The remaining applicant becomes solely responsible for 100 per cent of the outstanding EMI, regardless of any private agreement between the two borrowers about shared financial liability.
Both Credit Scores Take an Immediate Hit
A missed EMI appears on the credit report of both the applicant and the co-applicant simultaneously. Even one month of delay can cause a significant CIBIL score drop for both parties, making future borrowing harder and more expensive for everyone involved.
Penalties and Penal Interest Begin Accumulating Instantly
Lenders charge penalties of 1 to 2 per cent on every overdue amount, plus additional penal interest on top of the regular loan rate. These charges accumulate rapidly and increase the total outstanding debt significantly with every passing month of EMI default.
Recovery Notices Are Issued Against Both Parties
Once repayment stops, the lender sends formal recovery notices to both the applicant and the co-applicant. Repeated non-payment escalates to legal notices, recovery agents, and formal proceedings that can affect both borrowers professionally and personally.
Secured Assets Can Be Seized Under the SARFAESI Act
For home loans and car loans, the lender holds the right to seize and auction the mortgaged asset under the SARFAESI Act without court intervention. Asset seizure becomes a real risk once the loan account is classified as a non-performing asset.
Criminal Cases Are Possible Under Section 138
If post-dated cheques or NACH mandates bounce due to non-payment, the lender can file a criminal case under Section 138 of the Negotiable Instruments Act. This transforms a financial dispute into a legal one with serious consequences for both borrowers.
What You Must Do the Moment the Co-Applicant Defaults
Pay the EMI yourself immediately to protect your credit score. Inform the lender early to explore restructuring or revised repayment plans. Consider refinancing the loan solely in your name or replacing the defaulting co-applicant with a reliable new borrower.
Disclaimer: The information provided on this website is for general informational purposes only and should not be considered financial or legal advice. Please consult with a qualified financial advisor before making any decisions.
