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Is There Can Be An Economic Co-person For A LAP?

michealanderson March 6, 2020

Loan against property is among the most viable choices of obtaining credit which is highly secured. Unlike the unsecured personal loans with exorbitant interest rates, the guaranteed option of a loan against property provides feasible interest rates through property submission. For example, NBFC platforms such as PNB Housing Finance provide loans at competitive interest rates of 10.50% to 11% on commercial property and 10.25% to 10.75% on residential properties.

However, for applicants who are unable to meet the lender’s eligibility criteria, a financial co-applicant can be a boon. Drafted below is a comprehensive compilation on individuals who can be designated as co-applicants and the eligibility criteria for the same.

Co-applicant for a loan against property

Applying with a co-applicant increases the strength of the application as it improves the loan against property eligibility. Thus having a co-applicant improves the loan amount sanctioned in loan against property.

There are certain factors that applicants should heed to before considering a co-applicant addition. 

  • Credit scores

Credit scores play a vital factor for loan approval of any segment. The credit scores of both applicants should satisfy the eligibility criteria set by the lender. Financially strong applicants can negotiate on interest rates.

  • Income

The co-applicant should have a regular income flow. It is essential because

  • It strengthens the lender’s trust in the borrowers’ reliability
  • In case of a default in loan payment by the primary applicant; the co-applicant can take the full responsibility of repayment.
  • Tax benefit eligibility

Combined tax benefits are higher than that of a single applicant’s. All co-applicants are eligible for tax deductions under section 24 and 80 C of the Income-tax act.

Applicants can avail the tax benefits based on their input into the principal amount and interest repayment.

Hence applicants can formulate their share on the tax benefits by discussing their contributions before availing the loan.

Who can be co-applicants in loan against property?

Generally, most financial institutions have norms on the individual who can be designated as a co-applicant as follows:

  • The co-applicant can not be a minor
  • Combination of co-applicants:
  • Husband and wife
  • Father and son (if there is more than one son in the family; the father cannot be the primary owner)
  • Brothers
  • Father/ mother and unmarried daughter

Documentation required

The documents to be submitted by co-applicants include:

  • ID Proof
  • Address Proof
  • Proof of co-ownership on the property

Final thoughts

Application for a loan against property strengthens with a co-applicant. Besides the added tax benefits, through co-applicants, the sanctioned loan amount increases due to expanded eligibility with a co-applicant’s credit score and income. However, applicants should be cautious while choosing a co-applicant. In the event of a dispute, the loan recovery process is initiated on both the applicants. Also, by utilising the online EMI calculators, applicants can narrow down the lenders who provide the most feasible interest rates and loan amounts.

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