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.
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.
Frequently Asked Questions
What is the co applicant mean?
A co applicant can be any person who applies for the loan along with the primary applicant or the borrower of the loan. So, you can say that a co applicant is an additional applicant involved in the process of sanctioning loans. Where in some of the cases the co applicant will be considered as the second person after the main loan applicant.
How does a co applicant work?
A co applicant is the one who applies for a loan with you and is held accountable for the loan if the partner defaults, dies, or is not in a condition to pay the amount of the loan. So, the co applicant becomes the co borrower and is liable to pay all the amount.
Does being a co applicant affect your credit?
Yes, a co applicant can affect your credit score as your income and co applicant income is combined for the purpose of loan application and loan sanction. Where a god credit score of co applicant can prove to be favorable for the applicant.
What is the difference between a co signer and a co buyer?
A Co signer or the guarantor or say a consigner is the one who agrees to sign for the loan to get the approval of financing the loan by the bank. A co buyer is not involved with the transactional matter of the loan. Whereas the co buyer is equally liable for the amount of loan borrowed as he is considered as the second applicant for the loan, and thus equally bears the amount of loan due and thus also known as the co borrower.
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?
What is a co-applicant? For Home Loan.
What is a co-applicant? For Car Loan.
What is a co-applicant? For Personal Loan.