Are you unable to take a loan? Does the bank reject your loan application every time you apply for one? Then, here’s another way you can try going for a loan. You can apply for a co-borrower loan. In this type of loan, you will have to apply along with another person. The other person may be a friend or a family member. But how does co-borrower loan work, you may ask. Well different rules apply in different scenarios. So, it is difficult to tell exactly that. However, here ‘s a broad take on why you should apply for a co-borrower loan:
Co-borrower Loan Benefits
The first step to applying for a co-borrower loan is deciding upon the co-applicant. Be it a family member or a friend, the applicable rules change. Also, certain arrangements work better than others. One such example is of spouses. If they jointly apply for a home loan, they do not even need to be joint owners of the property. Why? Because they will be living together. In case of friends, the conditions will change and your loan application may be rejected altogether. The only way it may work is if your friend is your partner in a firm as well.
Credit Score Eligibility
You will not get a loan that easy. For it to happen, you must have a good credit score. However, the bank may still reject your application when you do not meet their credit score eligibility criteria. Say, you have credit score of 550 and the bank asks for a score of 650. A co-borrower with a good credit score of, say 750, can help you secure the loan. By using a co-borrower, your credit score gets a boost and makes you eligible for a loan.
Repaying a home loan helps you benefit from tax deductions. If you have only one home loan, you can claim for deductions under Section 80C and Section 24. The Section 80C pertains to deductions towards principal payments. Section 24, on the other hand, pertains to deductions towards interest payments. In case of a co-borrowed loan, each co-borrower can benefit from the deductions. Also, while the deductions can usually be availed by just one person, the co-borrower loan makes both co-borrowers eligible for the same.
So, you see how you stand a better chance at opting for a co-borrower loan instead of a regular loan. This way, each co-borrower reduces the financial burden on the other person. Also, a bank stands a better chance at recovering the loan forwarded to you when it is a co-borrower type. So, what are you waiting for? If you need a loan, apply for a co-borrower loan right now.