LoanBoss Blog

Essence of Having Co-applicants

07 Jun, 2012 By:admin in Home Loan,

The cost of living is very high and is on a consistent rise. People who are looking forward to buy property can't pay the asking price on their own, given the heavy price tags associated with realty business in the country. They are left with no other choice to get a loan. And when it comes to applying for a loan, one can get great benefits from adding a co-applicant to his loan application. A co-applicant is a person who can jointly apply for a loan with the primary applicant.  
The main advantage of having a co-applicant by one's side is increasing the odds of getting a larger amount loan. When two people jointly apply for a loan, one is listed as the primary applicant and the other as co-applicant. During the process, the lender examines the application, both applicants' credit score and overall financial standing in order to decide the loan amount and tenure. After the loan is granted, both applicants become co-borrowers and account for debt repayments as per their shares. 
So, who can be a co-applicant? Family members – spouse, parents, brothers and children are the only people who can jointly apply for a loan. It actually varies from one bank to another – some banks don't allow siblings to co-apply. And the person co-applying must not be a minor. A co-applicant can be a brother, but not a sister. Even in case of a brother, it's important that both the brothers stay together and also intend to do so in the newly purchased property. 
Though designed for maximizing loan eligibility, co-applications' biggest advantage is tax savings. A borrower can claim tax deduction on the loan's interest portion under Section 24(b) of Income Tax Act. Both the borrowers are entitled to tax benefits in the proportion to their share of the loan amount. The principal repayment component as well as the interest usually exceeds the deduction limit only because the amount is extremely large when applied jointly. 
Having a co-applicant has its downside as well. If a person is in course of preparation for investing in a second home, he will have to be confronted by some loss. As per the Income Tax Act if a person owns more than one house, only one will be considered as self-occupied and others as rented out. Henceforth, he will have to pay tax on the rent received because one of the house is considered rented out, even if that's not the case. This means the person will have to pay tax on an income he is not receiving.  
Applying for a joint home loan comes with significant benefits in optimizing loan eligibility and getting tax benefits. And at the same time, has a drawback as well. Therefore, one must very carefully gather all information about co-applications in order to make an informed and right decision. 

The cost of living is very high and is on a consistent rise. People who are looking forward to buy property can't pay the asking price on their own, given the heavy price tags associated with realty business in the country. They are left with no other choice to get a loan. And when it comes to applying for a loan, one can get great benefits from adding a co-applicant to his loan application. A co-applicant is a person who can jointly apply for a loan with the primary applicant.  

The main advantage of having a co-applicant by one's side is increasing the odds of getting a larger amount loan. When two people jointly apply for a loan, one is listed as the primary applicant and the other as co-applicant. During the process, the lender examines the application, both applicants' credit score and overall financial standing in order to decide the loan amount and tenure. After the loan is granted, both applicants become co-borrowers and account for debt repayments as per their shares. 

So, who can be a co-applicant? Family members – spouse, parents, brothers and children are the only people who can jointly apply for a loan. It actually varies from one bank to another – some banks don't allow siblings to co-apply. And the person co-applying must not be a minor. A co-applicant can be a brother, but not a sister. Even in case of a brother, it's important that both the brothers stay together and also intend to do so in the newly purchased property. 

Though designed for maximizing loan eligibility, co-applications' biggest advantage is tax savings. A borrower can claim tax deduction on the loan's interest portion under Section 24(b) of Income Tax Act. Both the borrowers are entitled to tax benefits in the proportion to their share of the loan amount. The principal repayment component as well as the interest usually exceeds the deduction limit only because the amount is extremely large when applied jointly. 

Having a co-applicant has its downside as well. If a person is in course of preparation for investing in a second home, he will have to be confronted by some loss. As per the Income Tax Act if a person owns more than one house, only one will be considered as self-occupied and others as rented out. Henceforth, he will have to pay tax on the rent received because one of the house is considered rented out, even if that's not the case. This means the person will have to pay tax on an income he is not receiving.  

Applying for a joint home loan comes with significant benefits in optimizing loan eligibility and getting tax benefits. And at the same time, has a drawback as well. Therefore, one must very carefully gather all information about co-applications in order to make an informed and right decision. 

Comment:(6)
on 01 Oct, 2017

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on 18 Dec, 2015

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on 26 Aug, 2015

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on 25 Feb, 2014

good content provided..

on 25 Feb, 2014

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