Advantages of Including a Co-Applicant on Your Home Loan_WC

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Benefits of Having a Co-Applicant on Your Home Loan _WC

7 min 21 Jan 2024
Co-Applicant Benefits in Home Loan
Highlights:
  • Who is a Co-Applicant
  • Benefits of Adding a Financial Co-Applicant

A Home Loan is one of the most convenient credit tools available to aspiring Home Loan buyers. A Home Loan allows borrowers to build an appreciating asset in a hassle-free manner. Lenders want to minimise any chances of default and therefore, set stringent eligibility criteria for Home Loan. Not meeting these eligibility criteria may lead to a Home Loan application rejection. However, borrowers with low Home Loan eligibility can enhance their chances of Home Loan approval by adding a co-applicant to their application. Borrowers who meet the eligibility criteria can also add financial co-applicants to their Home Loan applications to avail of better loan terms. In this article, we look at the benefits of having a co-applicant.  

Who is a Co-Applicant in a Home Loan?

A co-applicant is an individual who shares the responsibility of Home Loan repayment with the primary borrower. A borrower can add up to 7 co-applicants to a Home Loan application. All co-applicants are equally responsible for repaying the Home Loan amount.  

You may choose to add a financial co-applicant to enhance your Home Loan eligibility, preferably adding someone who has a good credit profile and a high credit score of at least 750. Adding someone creditworthy will certainly increase your chances of getting approved for a Home Loan.  A borrower can add any immediate family member as a co-applicant for a Home Loan. Parents, spouses, brothers, and children can be added as co-applicants on a Home Loan application.   

Now that we are clear on the duties of a co-applicant and who can serve as a co-applicant, let us look at why borrowers should consider adding a co-applicant to their application. 

People Also read:  A Complete Guide on the Benefits of Joint Home Loan 

Benefits of Having a Financial Co-Applicant 

Adding a financial co-applicant comes with several benefits, some of which are listed below: 

You May Get Access to a Higher Loan Amount  

Borrowers decide whether to accept a loan application or reject it based on a borrower's credit score and they decide the loan amount to be sanctioned based on the individual's income profile. When a borrower adds a financial co-applicant, the lender looks at the combined income of all the co-applicants while deciding the loan amount to be sanctioned. Thus, when borrowers add co-applicants who are working, they automatically become eligible for a higher loan amount. 

You May Be Able to Access Low-Interest Rates

When you add co-applicants with a strong credit score and good income profile, you increase your chances of availing of a Home Loan at lower interest rates. This happens primarily due to two different reasons.

First, when you add co-applicants to your loan application, you minimise the risk involved for the lender in lending you money since the responsibility of loan repayment is shared by multiple people and therefore, the chances of default go down as well. Thus, when a borrower adds reliable and creditworthy co-applicants, they enhance their negotiating power and can negotiate for a lower interest rate on a Home Loan.  

People Also Read: Important Factors that Affect Your Home Loan Interest Rate 

You Will Be Able to Save a Lot of Taxes

If you are planning to avail of a Home Loan to buy a home, you must consider adding your spouse or children or parents, if they are working, as co-applicants. Not only will this make you eligible for a higher loan amount, but it will also allow you to save more tax.  

Co-applicants who are co-owners can avail of home loan tax benefits separately. Under Section 80C of the Income Tax Act, all co-applicants can claim up to a maximum of Rs.1.5 Lakh as tax deductions on payments made towards principal repayment. Similarly, all co-applicants can also separately claim tax deductions up to a maximum of Rs.2 Lakh on payments made towards interest repayment. However, these tax exemptions are only available when the co-applicants are also co-owners. 

Final Words 

Adding a financial co-applicant has many advantages. However, before adding anyone as a co-applicant, explain to them their roles and responsibilities and have them on board with you in this journey only if they feel as responsible as you towards building this asset with you.

Also Read: Impact Of a Co-Applicant’s CIBIL Score On Your Home Loan Application  

Frequently Asked Questions_WC

Frequently Asked Questions

​​​Yes, if you are a co-applicant on an ongoing Home Loan, you can still avail of a second Home Loan. Lenders will evaluate your borrowing eligibility and assess your creditworthiness, and subsequently your loan offering before making an offer. ​​

​​Yes, a co-applicant can have a different address, without having an impact on their application. Lenders only require an address proof from all applicants, and a valid proof will suffice for this purpose. ​

A co-applicant on housing loan can be parents, spouse, brother, and children, except married daughters.

No, your friend cannot be a co-applicant for a Home Loan.

An applicant is a primary borrowers of the loan whereas a co-applicant is a secondary applicant who shares the responsibility of repaying the loan with the primary borrower.

A co-applicant’s score will not affect your credit score. However, if the primary applicants fails to repay EMIs, it may negatively impact the credit profile of both the applicants.

A co-applicant is an individual who shares the responsibility of repaying the Home Loan with the primary applicant. The co-applicant is equally responsible for repaying the Home Loan amount.

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DISCLAIMER:

While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent errors or delays in updating the information. The material contained in this website and on associated web pages, is for reference and general information purposes, and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. Neither Bajaj Housing Finance Limited nor any of its agents/associates/affiliates shall be liable for any act or omission of the Users relying on the information contained on this website and on associated web pages. In case any inconsistencies are observed, please click on contact information.

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