Do you know what is a co-applicant? Or the purpose of co-applicant, why banks and financial institutions prefer co-applicant. And how a co-applicant can increase your credit score as well? If you want to find answers to all your questions regarding co-applicant, then you are in the right place. So, let’s get started with what is a co-applicant? Or what does co-applicant mean?
What Is A Co-Applicant?
A co applicant can be any person who applies for the loan along with the primary applicant or the borrower of the loan. This is done for the purpose of including the co applicant income with the borrower’s income while taking up the loan and thus improving the chances of getting up a loan.
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Therefore, two individual persons can apply for the same loan taking the full responsibility of the loan on them both.
So, you can say that a co applicant is an additional applicant involved in the process of sanctioning of the loan. Where in some of the cases the co applicant will be considered as the second person after the main loan applicant.
Here, you need to see that the co applicant is different from the co-signer or guarantor of the loan. Where the co-signer or guarantor is helping the applicant in the loan process and is not involved with the transactions related matters where the co applicant is responsible for transactions related matters as the co applicant shares the transaction with the main applicant.
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Some Common Types Of Cases Of Loan
Some common types of cases of the loan in which co applicant relationship can be developed with the first applicant of the loan are as follows
- Co-Applicant For A Home Loan
When you are taking a home loan then co applicant for a home loan can be made between brother and a brother, a father and a son, as well as a husband and wife and also considering Parents and unmarried daughters.
- Co-Applicant For A Car Loan
When you are taking up a car loan then also the co applicant can come into the picture.
- Co-Applicant For A Personal Loan
When you are taking up a personal loan then also the co applicant can come into the picture.
Who Can Be A Co-Applicant?
Although, the criteria to be a co applicant are different in the case of different banks. However, some of the common cases of co applicant are as follows
- Husband And Wife
Husband and wife co applicant combination is most common where the lender considers the income of both Husband and wife for the approval of the loan. In co applicant for a home loan, we mostly see this co applicant combination.
- Father And Son
Father and son can also apply for a common loan. Although the final decision rests with the bank.
- Parents And Unmarried Daughters
Parents and unmarried daughters can also become the co applicant.
Who Cannot Be Co-Applicant?
Although, the criteria to be a co applicant are different in the case of different banks. However, some of the common cases where co applicant relationship cannot be established are as follows
- Married daughter & mother/father.
- Sister and sister.
- Sister and brother.
Benefits Of Having A Co-Applicant
Having a co applicant is beneficial for the applicant in the following ways
- Chances of loan approval.
- Good credit score.
- attractive home loan interest rate offered for good credit score.
- Can get combined tax benefits if have a combined property.
- Can get a bigger amount of loan.
Can A Co-Applicant Hurt Your Chances?
Your chances of loan approval could be hurt if the co-applicant doesn’t have credit as good as yours or if the co-applicant already owes a lot. You could become responsible for the full loan amount if something happens and the co-applicant can’t keep up with their required loan payments.
Does My Co-Applicant Need Good Credit?
Your cosigner will be responsible for the loan if you’re unable to pay, and having one can make you more appealing as a borrower. So, what credit score does a cosigner need? Typically, a cosigner needs a good or excellent credit score, but requirements vary by lender.
Can Co-Applicant Be Removed?
Contact your lender and request a novation
Ask your lender for a novation to erase the name of your co-applicant from your home loan. A novation is a declaration that shifts the responsibility of repayment of the home loan from two borrowers to one.
Does CO-Applicant Mean Co Owner?
A co-applicant is a person who applies for a home loan along with the principal borrower and shares responsibility towards loan repayment. A co-applicant can enjoy tax benefits provided s/he is also a co-owner.
What Is The Responsibility Of A Co-applicant?
The co-applicants are provided with the loan principal, both are responsible for repayment, and both applicants will be named on the title when the debt on the home is paid.
Does It Matter Who Is The Co-Applicant?
Co-applicants are people that participate in the loan application process alongside the main applicant. They will be considered equally as the applicant, though. They will also matter when it comes to approval, so things like their credit history can positively or negatively impact the loan and its interest rate.
Paying a loan amount is often difficult but what if the burden is shared with the applicant of the loan. The co applicant shares the burden of the loan with the applicant and thus also known as the co borrower and is legally liable to pay all the amount of the loan in case the applicant fails to do so. So, after reading the above article you might have understood what is a co applicant? And how co-applicant is liable to pay the loan with the applicant.
In this article, we have successfully explained What is a co applicant?