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Is this one and the same, or different

Some home loan concepts can be confusing, especially those such as; borrower-applicant, upfront-processing fee.

Pooja Gawde

10 Sep 2008

I have been reading and writing about loans for a while now. But just the other day, amidst a discussion, I realized how confusing certain basic concepts can be.

Whether one talks of a loan or fills in a loan application, the term 'co-applicant' gains significance. This term can enable you to get a loan which you otherwise may not be eligible for, solely.

Another term often used in a similar context is 'co-borrower'. This refers to a person who is a joint borrower of a loan.

The terms joint or 'co-applicant' refer to the 'other' or the 'second' person associated with the loan at the stage of application. The 'applicant' becomes the 'borrower' or the 'co-borrower' to the loan once he/she meets the eligibility criteria set by the bank.

If we talk of the two terms with special reference to home loans, then a co-applicant can be a co-borrower to a home loan but not necessarily a beneficiary of tax deduction benefits because he may not be co-owner of the property.

So simply put, a co-applicant can be a co-borrower to a loan though he doesn't really have to own anything.

I was again in tangles while talking about processing fee and/or upfront fee charged by the bank for a loan. Processing fee is the fee charged by the bank to get the loan process going. Some banks also use the term upfront fees. Banks seem to use these terms interchangeably. Most banks will mention both these terms together, as used by the State Bank of India 'Upfront/processing fee'.

Others such as UCO Bank offer a loan scheme called 'UCO REAL ESTATE' wherein its stated that 'Processing & Up-Front Fees' are charged by the bank to the loan consumer. These loans are offered to the Promoters/Developers of real estate.