Question by : How does a co applicant affect a loan application. or what does a co applicant or joint application do? Best answer for How does a co applicant affect a loan application. or what does a co applicant or joint application do?:
Answer by Mike
Co-applicant's are jointly responsible for repaying a loan. This is compared to a co-signer who has contingent responsibility to repay a loan. Co-applicant's legally treated the same as the primary borrower. The most common co-applicant is a spouse. So when the applicant does not make a payment, the lender can immediately proceed against the co-applicant without exhausting 'recourse' or more commonly called collections efforts against the primary borrower. In other words, if the applicant doesn't pay on time - the knee-breakers can show up at the co-applicant's house and get their money. From a lender's perspective, a co-applicant is very valuable because it gives two people to go after to get their money back. In practice, non-spouse co-applicants are usually parents or siblings where the borrower is financially irresponsible. So the co-applicant has a good credit score that they want to protect, or financial resources that can be garnished. The existence of at least one non-spousal co-applicant's reduced default in a credit-card pool I recently analyzed by 72%. The existence of a co-signer's reduced default by 53%.
Harsh Roongta, CEO of www.apnapaisa.com on Zee Business Money Guru 03 July 2012. Join us on http
http://leafgardenpress.com/ Need loan to buy flat, how to check eligibility and further process answered by Harsh Roongta
guardian.co.uk, Wednesday 27 June 2012 07.30 BST. Q I am looking to take out a mortgage in the next few months. It will be a joint application. Our combined salaries are about £31000. I have an existing loan with a balance of £1200, which will be paid ... Will an outstanding loan affect our ability to get a mortgage?
When you take a mortgage loan, you often consider whether you should take it in single name or jointly. A mortgage loan can be taken by you individually or it can be taken in joint names. A joint mortgage loan is nothing but a home loan taken jointly by two people. In today's world the real estate prices are soaring in the sky. Couples need to take a loan to own a house. A single person will not be eligible for a very high loan amount. Thus is the need for joint loan. Before taking a joint loan, use a loan calculator to understand your EMI, tenure and other issues of the loan.
Benefits
There are many advantages of taking a joint loan.
Increased Loan Amount
One major factor for the loan amount is the EMI as a percentage of your monthly pay.
A high EMI to monthly pay ratio makes a possibility of defaulting. Thus the bank gives loan on your repaying capacity. Higher your monthly pay, higher could be the loan amount. Therefore, when you club your monthly pay with your partner's, for the purpose of joint loan, the loan amount also is high. Here the bank combines both your monthly incomes and sanction the loan in proportion to the combined pay.Income Tax Benefits
There will be income tax benefits for both the partners. Let's say you are eligible for a tax savings of $ 1000 on this loan amount. But if the loan is not joint name, and both you and your partner is paying the EMIs, then you both can avail tax benefits of $ 1000 each making the combined benefit of $ 2000 on the same loan.
If you would have taken the loan on individual name, you could have availed benefits worth only $ 1000.Greater Credit scores
Once the loan debt is paid off, a person enjoys a greater credit score. But if the loan was in joint name, then both the partners would enjoy a greater credit score on the basis of the same loan.
Drawbacks
From the above benefits is very obvious that a joint loan offers many advantages like higher loan amount, tax benefits, good credit etc., but there is always a flip side to everything. A joint loan has its own complications and drawbacks.
Joint Tenants
In case your co-applicant for joint mortgage loan is not your spouse, but is you friend or other family member, you might have to share your space with them. You might have to adjust your lifestyle. Even in case of a dispute, you cannot throw them out of your house. Even they own the place. You might have to draw up a co-habitation agreement and trust deed.
Issues in case of separation
In case the couple divorces, or in case of the partners breaking their partnership, there would be a problem for the repayment of loan. The debt needs to be split between the two applicants. This will be a complicated process. The bank would need to modify the mortgage application. This might result in the need to sell the house and pay the debt. Debt-splitting is a tedious process that involves heavy stress and huge legal fees.
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