Co-borrower defaulting on your home loan EMIs?

5 MinsMay 16, 2023

When taking a home loan, having a co-borrower can increase the chances of loan approval and reduce the interest rate. Paying your home loan on time can help you build a good credit score. However, if the co-borrower defaults on EMIs, it can have serious consequences for both of you. Let us understand the various scenarios and consequences in detail.

Co-borrower defaulting on your home loan EMIs?

Penalty for delay

When a co-borrower defaults on their EMI, the bank may impose a penalty for the delay in payment. The penalty can be a percentage of the EMI or a flat fee, depending on the bank's policy. This penalty is charged to cover the cost of the administrative work involved in chasing up late payments. It is important to pay the penalty along with the EMI to avoid further charges. It also helps maintain a good credit score.

Impact on credit score

A default by the co-borrower can affect the credit score of both parties. A credit score is a numerical representation of an individual's creditworthiness based on their credit history. A default can significantly impact your credit score, making it harder to get approved for loans in the future. It is essential to maintain a good credit score by paying EMIs on time and maintaining a healthy credit history.

[Also Read:Can you get a home loan with a low CIBIL score?


Minor default on Home Loan

If the co-borrower misses one or two EMIs, the bank may consider it a minor default. In such a case, it is crucial to immediately contact the bank and explain the situation. The bank may offer a grace period or an option to restructure the loan to make the repayment schedule more manageable. Restructuring the loan may involve extending the tenure or reducing the EMI amount, making it easier to repay the loan.

Non-Performing Asset (NPA)

If the co-borrower defaults on EMIs for a prolonged period, the loan may be classified as a Non-Performing Asset (NPA). An NPA is a loan or advance where the interest or instalment of principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, the bank may take legal action to recover the outstanding amount. In such a scenario, it is advisable to contact the bank and explore options for restructuring the loan or settling the outstanding amount.

Partial payment on Home Loan

If the co-borrower is unable to pay the full EMI amount, they may choose to make a partial payment to avoid default. However, this may result in an increase in interest charges and may impact the credit score. It is important to speak to the bank and understand the impact of making partial payments on the loan.


To sum up, it is important to carefully consider the implications of having a co-borrower. You should have a plan in place in case of default. If you are facing such a situation, it is recommended to contact your bank immediately to explore your options.

At Axis Bank, we offer a range of solutions to help borrowers manage their home loans, including loan restructuring and settlement options. Our aim is to provide support to our customers during difficult times and ensure that you are aware of all your options. Apply for a home loan with Axis Bank today and rest easy.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.