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About Co-Applicants and Co-Signers for Home Loans
When applying for a Home Loan, a borrower may opt for either a co-applicant or a co-signer. Both options help to increase one’s eligibility for a Home Loan through shared responsibility. However, there are a few notable differences between the two, mainly involving the condition for responsibility. If you are planning to avail of a Home Loan, you must have a very clear understanding of the differences between a co-signer and a co-applicant. This will not only give you a better understanding of the concepts but will also help refine your Home Loan application to increase your chances of approval.
Who is a Co-Signer?
A co-signer is a person or organisation who needs to add their personal information and income details when a borrower is applying for a loan. In case the primary borrower defaults, the co-signer needs to step in and repay the loan.
Who is a Co-Applicant?
A co-applicant is someone who has applied for a loan along with the primary borrower. Unlike a co-signer who is only responsible for EMI payments in case the primary borrower defaults, a co-applicant is as responsible for EMI payments each month as the primary borrower. Thus, a co-applicant shares the burden of the loan with the co-borrower.
Differences Between a Co-Signer and Co-Applicant
Following are some notable differences between a co-signer and a co-applicant that borrowers should be aware of during their Home Loan application:
- A co-applicant is also primarily responsible for Home Loan repayment. A co-signer, on the other hand, acts as a guarantor and is responsible for providing support to the primary borrower in case of a financial crunch.
- While the credit score and income profile of both the co-applicant and co-signer are scrutinised by the lender, the profile of a co-applicant undergoes much stronger scrutiny than the profile of a co-signer.
- Co-applicants who are co-owners can avail of tax benefits mentioned under the Income Tax Act. Co-signers on a Home Loan cannot avail of such tax benefits.
If you are planning to buy a home and need a Home Loan but your Home Loan eligibility is low, you can benefit from adding a co-signer or co-applicant to your application. However, make sure that your co-signer or co-applicant understands their role and responsibilities well.
*Terms and conditions apply.
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