Difference Between Co-owner, Co-borrower, Co-Applicant, and Co-Signer in Home Loan

Most people who choose to serve as a co-applicant or a co-signer do not know the difference between the two. Co-borrowers, co-signers, co-applicants and co-owners have different legal and financial responsibilities. Depending on the role you have chosen, your responsibility towards loan repayment will vary too. Therefore, one must make themselves aware of the differences between these various roles so that one can make right decisions regarding what role they can play efficiently.   

​​​Who is a Co-Applicant? 

A co-applicant is an individual who shares full responsibility for loan repayment. For instance, if Mr A and Mrs B have taken a loan together and are co-applicants on a loan, the responsibility of servicing Home Loan EMIs falls both on Mr A and Mrs B. To avoid any legal disputes, lenders generally ask all co-owners to serve as co-applicants. However, if a co-owner wants, they can refuse to be a co-applicant. 

Individuals who wish to avail themselves of a Home Loan must meet their lender’s qualifying criteria. In other words, they must have a stable income, a stable job, a CIBIL score of 750 or above, etc. If an individual does not meet a lender’s qualifying criteria for a loan, their application gets rejected. In this case, to enhance their Home Loan eligibility and become eligible for a Home Loan, borrowers can consider adding a co-applicant with an excellent credit and income profile. Here are two things that people must know if they plan to serve as a co-applicant on someone’s Home Loan: 

• Co-applicants who are not co-owners do not have any legal right over the property against which the loan has been taken. 

• Co-applicants who are not co-owners cannot claim tax benefits available to Home Loan borrowers under various sections of the Income Tax Act. 

​​Who is a Co-Borrower?

A co-borrower is a person who is as responsible for loan repayment as the original borrower. If one avails of a Home Loan and adds a co-borrower, it is the primary applicant who services the Home Loan EMIs. However, if for some reason, the primary applicant finds it difficult to pay their EMIs or in the case of the demise of the primary applicant, it becomes the responsibility of the co-borrower to pay the Home Loan EMIs. Not everyone can serve as a co-borrower; lending institutions have guidelines regarding who can serve as a co-borrower on a Home Loan. For instance, most lending institutions do not allow parents to co-borrow a loan with an unmarried daughter as this can lead to property-related disputes in the future. In general, most people choose to add their partner, child, or an immediate relative as a co-borrower.  

If you are planning to accept to be a co-borrower on someone’s loan, here are a few things you must keep in mind:  

• Since you are a co-borrower, your credit and income profile will have an impact on the primary borrower’s ability to avail of a loan. If you have an excellent credit score and a stable job and income, the probability of the primary borrower availing of the loan on beneficial terms and conditions will increase too.  

• Co-borrowers are not necessarily always co-owners. However, co-borrowers who are also co-owners can claim tax benefits under Section 80C and Section 24b of the Income Tax Act and maximize their tax savings.  

​​Who is a Co-Owner? 

Who is a Co-owner? A co-owner is a person who has a legal share in a property. However, if they do not choose to become a co-borrower, they are not legally responsible for repaying the loan money. However, if an individual borrows money against a property and fails to repay it, they stand to lose the ownership of the property and in this case, a co-owner who is not even a co-borrower may have to come forward and help with loan repayment to protect the property in question. It is thus that if one is taking a Home Loan or a loan against property, it is quite likely that the lender will ask all co-owners to serve as co-borrowers on the loan. If co-owners do not wish to sign up as co-borrowers, they must at least provide it in writing that they do not have any objection against the primary applicant borrowing money as a loan. Lending institutions do this to ensure there are legal hassles involved at a later stage.  

​​Who is a Co-Signer? 

As mentioned previously in this article, an individual must meet their lender’s Home Loan eligibility criteria if they wish to avail themselves of a loan. If a person has a low credit score and if the lender feels the risk involved for them in lending money to the loan applicant is too high, they might ask the loan applicant to add a co-signer. A co-signer has no legal rights over the property. However, the co-signer is responsible for loan repayment in case of a loan default or if the primary applicant finds themselves unable to repay the loan money. Having a co-signer with excellent credit standing can help one avail of a loan at low-interest rates. It can also help a person avail of larger sanctions and request a loan tenor that works best for them. 

​​Final Words 

Now that we have cleared the difference between a co-applicant, co-borrower, co-signer and co-owner, let us answer some questions people have about these roles.