Securing a Home Loan often involves making significant choices, not only regarding which property to purchase but also how you apply for the financing itself. When exploring your options for Home Loans, you might question the role of a co-signer vs a co-applicant in Home Loan. Understanding the differences between these two roles and understanding how each can influence your Home Loan eligibility criteria and the entire application process is vital.
What is a co-signer?
A co-signer is someone who agrees to be responsible for your loan payments should you fail to make them. Essentially, a co-signer provides a safety net for the lender. This can help you secure a loan under better terms, potentially including more favourable Home Loan interest rates.
The co-signer does not have any legal claim to the property you are buying, nor do they have ownership rights. They are simply guaranteeing that the loan will be repaid.
What is a co-applicant?
In contrast, a co-applicant is jointly applying for the loan with you and has an equal obligation to repay the loan. Co-applicants are often spouses or family members who will co-own the property with you. Including a co-applicant in your Home Loan application can significantly boost your loan eligibility since both your incomes will be considered in the Home Loan eligibility criteria, potentially leading to a higher loan amount.
Difference between co-signer and co-applicant
- Ownership and rights: A co-applicant shares ownership of the property and has the same rights as the primary applicant. A co-signer, on the other hand, has no claim over the property.
- Financial responsibility: Both co-applicants are equally responsible for loan repayments, whereas a co-signer is only responsible if the primary borrower defaults.
- Impact on credit score: Both roles can impact personal credit scores. For co-applicants, timely repayment can boost their score, while for co-signers, the risk lies in the primary borrower defaulting, which could negatively affect their score.
How to choose between a co-signer and a co-applicant
Choosing between a co-signer and a co-applicant for your Home Loan application depends on several factors:
- Financial health: If your income alone is not sufficient to meet the Home Loan eligibility criteria, a co-applicant can help you qualify for a higher loan amount.
- Credit score: If your credit score is low, a co-signer with a strong credit history can help you secure better Home Loan rates.
- Long-term plans: Consider who will share the property with you. If it's a purchase with a spouse or a family member, a co-applicant is appropriate. If you're buying alone but need support on your application, a co-signer might be the right choice.
Also Read: 10 easy steps for the Home Loan application process
Conclusion
Understanding the difference between a co-applicant and co-signer in a Home Loan is essential as it can influence both your eligibility and the terms of your loan. Whether you opt for a co-signer or co-applicant, make sure they are someone you trust and understand the responsibilities involved.
With an Axis Bank Home Loan, achieving your dream of homeownership is within reach. Take advantage of smaller EMIs, appealing interest rates ranging from 8.75% to 9.15% p.a., and a flexible loan tenure of up to 30 years. Discover how Axis Bank can simplify your Home Loan experience with their thorough doorstep service and streamlined application process.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author 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. Please consult your financial advisor before making any financial decision.
