Have you ever wondered what is a co applicant while filling your loan application? The whole process of loan approval look so exhausting. One needs to collect and attach all the necessary documents to improve their chances of approval. The term co-applicant is often confused with co-signer. They might sound the same, but they aren’t! So, today I will help you in understanding the meaning of co-applicant. Here, I have even discussed the benefits of being a co-applicant along with the difference between co-applicant vs co-signer. Without doing any more time pass, let’s find out what is a co applicant in detail.
What Is A Co Applicant?
A co-applicant is an additional person who takes part in the loan application process along with the primary applicant. These individuals are also called co-borrowers or co-buyers.
Criteria To Be A Co-Applicant
There are different criteria for being a co-applicant. Following are the most common pairs adopted by the banks.
- Husband And Wife: It is one of the most preferred co-applicant combinations in terms of home loans.
- Father And Son: Even father and son can co applicant for personal loan or home loan.
- Parents And Unmarried Daughters: Unmarried daughters can pair up with either their father or mother to be co-applicant for any loan application.
Duties Of A Co-Applicant
Here, I have highlighted some tasks performed by the co applicant for a home loan.
- The individual shares the responsibility for repaying the loan equally along with the applicant.
- They do have the right to collateral.
- They are fully liable for the loan when the applicant fails to repay the loan.
Benefits Of Having A Co-Applicant
There are several major benefits of having a co-applicant. Below, I have listed down a few of them.
- Co-applicants increase your chances of getting approved for the loan.
- They make you qualify for lower rates and better loan terms with their credit scores.
- A co-applicant will also help you to qualify for a higher loan amount.
- By being the co-owner of the property, they can enjoy combined tax benefits.
- Interesting home loan interest rates are offered to applicants with the help of co-applicants having a good credit score.
Difference Between Co-Applicant And Co-Signer
Co-signer and co-applicant are often used interchangeably. I have gathered some key factors that will clear out all the confusion between co-applicant vs co-signer.
| Co-Applicant | Co-Signer |
|---|---|
| A co-applicant is an additional person who takes part in the loan application process. | A co-signer is a person who pledges to pay back the loan if you do not. |
| They equally share the responsibility for repaying the loan with the borrower. | They do not share but take the responsibility of replaying the loan only when the main borrower fails to replay it. |
| These people may or may not have a good credit history, income, or assets. | These people always have a good credit history, income, or assets. |
| Their main intention is to get equal benefits from the loan as much as the primary applicant. | Their main intention is to help the borrower with their previous credit history. |
| It is often a less risky process. | In comparison with co-applicant, it is a quite risky procedure. |
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FAQ
What Is The Co-Applicant Mean?
A co-applicant means an additional person who takes part in the loan application process.
What Is A Co Applicant For Car Loan?
A co-applicant for a car loan is an individual who takes an auto loan with the main applicant.
How Does A Co-Applicant Work?
A co-applicant works in the following different ways.
- Co-applicants increase your chances of getting approved for the loan.
- They make you qualify for lower rates and better loan terms with their credit scores.
- A co-applicant will also help you to qualify for a higher loan amount.
- By being the co-owner of the property, they can enjoy combined tax benefits.
- Interesting home loan interest rates are offered to applicants with the help of co-applicants having a good credit score.
Does Being A Co-Applicant Affect Your Credit?
No, being a co-applicant does not affect your own credit score unless the main account holder misses his payments.
What Is The Difference Between A Co-Signer And A Co-Buyer?
The difference between a co-signer and a co-buyer is as follows.
| Co-Applicant | Co-Signer |
|---|---|
| A co-applicant is an additional person who takes part in the loan application process. | A co-signer is a person who pledges to pay back the loan if you do not. |
| They equally share the responsibility for repaying the loan with the borrower. | They do not share but take the responsibility of replaying the loan only when the main borrower fails to replay it. |
| These people may or may not have a good credit history, income, or assets. | These people always have a good credit history, income, or assets. |
| Their main intention is to get equal benefits from the loan as much as the primary applicant. | Their main intention is to help the borrower with their previous credit history. |
| It is often a less risky process. | In comparison with co-applicant, it is a quite risky procedure. |
Is It Better To Have A Co-Applicant For Loan?
If the co-applicant has better credit or a higher income than you, the co-applicant could significantly increase the chances you’ll be approved for a loan, could help you get a lower interest rate, and could help you to be approved to borrow more.
Conclusion
In my above-written article, I have given a brief answer for what is a co applicant. A co-applicant is a person who applies and signs for any loan along with the primary applicant. Their main task is to use their credit scores to increase the chances of loan approval. These people equally share the responsibilities of repaying the loan after being qualified. Some of the best examples of co-applicants are married couples, father-son duo, and parents-unmarried daughters. Here, incomes and credit history are used as criteria for the loan approval process. The whole process of applying for a loan will now look seamless as you know what is a co applicant.
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