Till,Debt,Do,Us,Part

　　In today’s times, joint debt, such as car and housing loans, and credit card dues is part of household finances. So, a divorce settlement will not only be about dividing assets but also loans taken together.
　　You may have agreed on the ownership of the house, but who will service the loan taken to buy it? What happens to the car that has been taken on loan? Couples seeking divorce often contest each other’s rights over assets and forget about the joint liabilities, which are more complex to handle. This is because a third party, the lender, is also involved. It is, therefore, important that you decide in advance on how to share these debts with least possible friction.
　　As a first step, you must inform the bank as loan agreements often require you to notify the lender about such changes in your lives. Unless there is any change in ownership of the property or a payment default, the bank will not interfere. So, if both decide to carry on sharing the loan burden even after part- ing ways, the lender won’t have any problem.
　　The problem arises when one spouse does not want to remain a co-applicant if he/she is not getting ownership of the property. In such a case, the other spouse may agree to transfer the loan in his/her name. However, this may not be acceptable to the bank in certain cases.
　　This is because joint loans are usually taken to increase the loan amount. “If the co-applicants decide to part ways, the basic purpose of joint borrowing is hit. So, lenders are generally reluctant to convert joint loans into single-borrower loans,” says Kamlesh Rao, executive vice president, Kotak Mahindra Bank.
　　If the bank had sanctioned the loan solely on the basis of the principal borrower’s income, it would be easier for it to take a call and remove the other name from the agreement. But even in such cases, banks conduct due diligence by reassessing the creditworthiness of the person to whom the loan will be transferred.
　　If the spouse’s income was considered while deciding the loan eligibility (you can get a joint loan without considering the co-applicant’s income), the bank will be unwilling to execute the change unless you get a new co-borrower on board so that your loan eligibility remains the same.
　　“The bank will consider the new proposition for repayment and may agree only if all its settlement criteria are met,” says Rao.
　　The criteria for removing your name as a guarantor from your spouse’s loan are the same; the bank won’t clear your name unless it gets an alternative.

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