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Home Loan Co-Applicant vs Co-Signer: Key Differences
2 mins Read | 4 Years 11 Months Ago
The average Home Loan processing time may vary depending on factors such as documentation completeness, verification requirements and internal assessment procedures. When you apply for a Home Loan, you can either be a co-applicant, co-signer, co-borrower or co-owner. And it is essential that you are aware of the legal and financial obligations, if you are a co-applicant or a co-signer. In this section, let us help you understand the difference between a home loan co-signer and home loan co-applicant.
Understanding the Roles of a Home Loan Co-Applicant and Co-Signer
A Home Loan co-applicant depends on financial contribution, repayment responsibility and eligibility requirements. Understanding their roles helps applicants plan loan structures effectively.
Are you purchasing a home loan It is definitely considered as an added financial responsibility. Considering the cost and tenure, it may not be possible for one person to single-handedly manage the loan repayment. For this purpose, you have the option to apply for the loan along with a co-applicant or a co-signer. Before applying for the same, it is essential for you to understand who can be a co-applicant or a co-signer of the loan. Although the terms are used interchangeably, they have distinct roles and responsibilities. Let’s get to know the difference between the two.
What Is a Co-Applicant?
A Home Loan co-applicant jointly applies for the loan and may share the repayment responsibility. A co-applicant can be either financial or non-financial, depending on their role in repayment. In some cases, the co-applicant may also have ownership rights in the property, based on the loan structure and the.
Difference between Home Loan Co-Signer & Home Loan Co-Applicant
- Loan Participation: A co-applicant is the one who applies with the primary borrower for the Home Loan and accepts to share the Equated Monthly Instalments (EMIs) and other responsibilities. A co-signer is the one who needs to pay, only when the Home Loan borrower is at default in making the loan repayment
- Eligibility Boost: Adding a co-applicant at the time of a Home Loan application, helps to improve your eligibility criteria for a higher loan amount. As a primary borrower, if you have a lower credit rating, you become less eligible for the loan. However, this is where the co-signer comes into the picture; if the individual has a high credit rating and has a decent income, he/she can make you eligible for the Home Loan
- Interest Rate Advantage: Due to an improved credit score of the co-signer’s profile, a primary borrower can avail loans at a lower interest rate. A co-applicant helps to share the Home Loan burden. Since a co-applicant is one of the parties to apply for the loan with the primary borrower, he/she can help to get them at an attractive interest rate
- Repayment Responsibility: A co-signer is not responsible for paying your EMIs; however, the individual will be liable for the repayment of the loan, in case of a default on your part. As mentioned earlier, the role of the co-applicant in a Home Loan, is to share the responsibility of the loan repayment along with the primary borrower
- Tax Benefits: If a co-applicant is also the co-owner (having a legal share) of the property, the individual is eligible to avail tax benefits. In case the applicant is not a co-owner, it is not possible to avail tax benefits. On the other hand, a co-signer cannot avail any tax benefits
- Generally, while applying for a joint Home Loan, the co-applicant is most often a spouse. Banks and financial institutions apply certain conditions if parents and children seek joint approval. A co-singer for a house can be a friend or family member, with a good credit history and a solid income.
How to Choose a Co-Applicant for a Home Loan?
Selecting a co-applicant depends on factors such as financial contribution, ownership intent and repayment responsibility. A co-applicant may be financial or non-financial, and understanding this distinction can help applicants structure their Home Loan application appropriately based on their income contribution and property ownership plans.
Applying for a Home Loan is the biggest financial liability. If you are a primary borrower, you need to be careful when you’re choosing someone to be a co-applicant or a co-signer. Once you select an option that is best for you, you can go ahead with the Home Loan. You can use a home loan eligibility calculator to know the eligibility of the loan amount if you are applying with a co-applicant and this will let you know how many EMIs you can afford.
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