What is the Difference Between Co-Signer and Co-Applicant for a Home Loan?

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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 co-signer and a co-applicant.

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:

• 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

• 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

• 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

• 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

• 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.

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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