What is Co-Applicant in Home Loan?

Getting a loan is easier with a co-applicant, but what does it mean? Here is a complete lowdown on co-applicants for loans

Taking out a loan is a huge commitment. It has many working parts, and it is not always easy to handle everything on your own. Your income may also not be enough to be eligible for a loan, so you must seek help. Co-applicants can help whenever you need help getting a loan.

When you apply for a loan with a co-applicant, it is like two people requesting a single loan and sharing the loan's liability. Here is everything else you need to know about a co-applicant if you are in the market for a personal loan or home loan.

Who is a co-applicant?

A co-applicant is a person who participates in the loan underwriting and approval procedure with you. A co-applicant may be regarded as secondary to a principal applicant in several instances. In terms of the loan's rights, a co-applicant is different from a co-signer or guarantor.

A co-signer can assist a primary applicant in obtaining favourable loan terms. They are, however, rarely granted access to the cash or affiliated with the collateral. As a result, a co-signer functions as a backup payment source for the borrower.

Who can be a co-applicant?

The requirements for being a co-applicant vary by bank. However, most banks' standard terms and conditions are as follows:

• For a home loan, the most favoured co-applicant combination is a couple. Lenders consider both the husband and wife's income when determining loan eligibility and approval.
• A home loan can be co-applied for by a father and his son. But the final decision is in the hands of the bank.
• A single daughter could be a co-applicant for a home loan with both parents or a single parent.

What does the co-applicant do?

If the applicant fails to repay the loan, passes away, or otherwise declines to engage in the agreement, the co-applicant is fully liable for the loan. Without regard to the cooperation agreement, the bank will seek collection from one applicant.

According to analysts, a co-applicant technically becomes a co-borrower, and as a co-borrower, he/she is responsible for the loan repayment and other obligations. If the borrower fails to repay the loan, the co-applicant becomes equally accountable for repayment.

Benefits of having a co-applicant

Some benefits of having a co-applicant, especially when taking a home loan, are as follows:

• The likelihood of loan acceptance rises when both co-applicants have a solid credit score and a steady income.
• Home loan providers offer low-interest rates to co-applicants who are financially stable and have a strong credit score.
• The co-applicants, who are also co-owners of the home, benefit from a combination of tax benefits.
• Co-applying for a house loan boosts both the applicants' creditworthiness.

Co-applying for loans is nothing new. People have been doing it for many years and continue to do so to get loans quickly. Today, you can even get personal loans by getting a co-applicant on board. You can even get benefits if you apply for a personal loan with a co-applicant.

Applying for a home loan with a co-applicant has always been a popular option, and that has not changed. Meanwhile, if you are in the market for a home loan or a personal loan, you can consider IDFC FIRST Bank. IDFC FIRST Bank offers competitive interest rates among other benefits, such as regular customer service on the banking app.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.