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 optimise your chances of approval.
Who is a Co-Signer?
A co-signer is required to step in only when the primary borrower defaults on loan repayment. In India, a co-signer can be an individual as well as an organisation.
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
- 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 scrutinized 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 any 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.
