Should You Add a Co-Applicant When Taking a Home Loan? Know the Pros and Cons

Buying a home is a dream for many, and while some manage to save enough for it, others opt for a home loan. When applying for a home loan, it's important to consider several factors to ensure the loan repayment process goes smoothly. One key aspect is deciding whether to apply alone or include a co-applicant in your home loan application. Let’s explore what a co-applicant is, their role, and the benefits they bring to the loan process.

What is a Co-Applicant?

A co-applicant is someone who applies for a loan alongside the primary applicant, sharing the responsibility of repaying the loan. Both the applicant and co-applicant are jointly accountable for the loan. Having a co-applicant can increase your chances of getting the loan approved and may even help in securing a higher loan amount.

Who Can Be a Co-Applicant?

Not everyone can be a co-applicant. Banks and financial institutions have specific guidelines regarding who can apply as a co-applicant. Typically, the following relationships qualify:

• Husband and wife
• Father and son
• Father and unmarried daughter
• Siblings

However, minors (below 18 years of age) are not eligible to be co-applicants.

Advantages of Having a Co-Applicant

1. Higher Loan Approval Chances

Including a co-applicant in your home loan application increases the chances of approval. Lenders assess the incomes of both the applicant and co-applicant, which may lead to higher loan eligibility.

2. Better Credit Score Impact

Lenders always check the credit score before approving loans. If your co-applicant has a good credit score, the approval process becomes easier, and you may also get a loan at a lower interest rate.

3. Shared Financial Burden

According to Malvika Singhal, Communication Manager at PaisaBazaar, one of the major benefits of having a co-applicant is sharing the financial responsibility. Both the applicant and co-applicant are liable for repaying the loan, which means the Equated Monthly Installments (EMIs) are divided, making it easier to manage the repayment.

4. Tax Benefits

Both the applicant and co-applicant can claim tax deductions under Section 80C of the Income Tax Act. Each can claim up to ₹1.5 lakh on the principal repayment. Additionally, under Section 24(b), both can claim up to ₹2 lakh on interest repayment.

5. Lower Interest Rates for Female Co-Applicants

If your co-applicant is a woman, you may benefit from a lower interest rate. Many banks and financial institutions offer interest rate concessions to female borrowers, resulting in long-term savings.

6. Longer Loan Tenure

If your co-applicant is younger, you may be eligible for a longer loan tenure. While this may lower your monthly EMI, it could result in higher interest payments over the loan period.

Disadvantages of Having a Co-Applicant

While there are numerous advantages to having a co-applicant, there are a few drawbacks as well. Both applicants are equally responsible for loan repayment. If one misses an EMI, it affects the credit score of both individuals. Choosing the wrong co-applicant can create financial and legal complications, so it’s essential to select a trustworthy co-applicant.