How to Avail A Personal Loan With A Co-Applicant

Personal loans are one of the most common and preferred ways to borrow money when you need it. Because the loan is structured in such a way that no collateral is required from you, it is critical to note that the bank or NBFC processing the loan application considers elements such as your income level, credit score, employment, and other considerations in determining your repayment ability. Your loan application is likely to be rejected if your salary is insufficient and you have no credit history. You can always choose a co-applicant to help you out in this circumstance. Joint finance is another term for this type of application.

Who is a co-applicant?

A co-applicant is someone who can join you in taking out a personal loan. Adding a co-applicant to a loan account has been increasingly popular in recent years, with the spouse being the most popular choice. Couples with a spouse as a co-applicant are increasingly taking out personal loans.

Who can be a co-applicant

A Co-applicant on your personal loan could be your spouse, parents, or siblings. Other than the standard loan application from spouse, only specific combinations are authorized in the case of home loans, such as parent-son, brothers, and unmarried daughter-father/mother.

Because a personal loan does not require security or pledged assets (such as a home, gold, or vehicle), alternative co-application combinations may be permitted. This would be determined by your banker’s or financial institution’s rules, regulations, and policies.

Role of a co-applicant

A co-applicant is accountable for repaying the lender for the personal loan. To determine personal loan eligibility, both applicants’ income and credit scores are considered. In the same way, if the couple, i.e. both parties, default on the personal loan, their credit scores will be affected, and the lender has the authority to pursue legal action against both parties if it so chooses. 

When you apply for a loan with a co-applicant, both of your salaries are combined into one loan, allowing you to qualify for a larger loan that may be more suitable for your requirements. Alternatively, it may make you qualify for a loan that would be difficult to obtain with a single salary.

Your credit score is similarly affected. If you have a bad credit score, a co-applicant with a strong credit score may be able to help you get your loan approved.

Furthermore, because both applicants are responsible for loan repayment, you can effectively share the repayment load so that neither one person is taxed with the entire EMI amount.

How credit score of co-applicant affect the loan approval

When applying for a combined personal loan, as previously stated, all partners must be involved. CIBIL scores are as well. When applying for a personal loan, the bank will typically examine the applicant’s CIBIL score before approving the loan. A co-applicant cannot assist you boost your credit score when it comes seeking credit. Furthermore, if you do not repay the loan on time, the co-credit applicant’s score would suffer. The debt-to-income ratio is one area where your co-applicant can assist you (DTI). Because their debts and income are factored in with yours, a co-applicant with a low DTI improves your chances of loan approval. 

Advantages of a couple co-applicant

Higher loan amount

Because the income of both applicants is considered when determining the maximum loan amount, there is a good likelihood that they will be approved for a larger loan because they are co-applicant.

Shared EMI

After a personal loan is accepted, a couple that was co-applicant becomes co-borrower. On a loan, co-borrowers assist in the regular distribution of the EMI burden. You can talk it over with your partner and have the lender deduct the EMI from both of your accounts. This also creates a shared sense of ownership and shared responsibility for any assets purchased with the personal loan. You can utilize personal loan EMI calculator tool on lender’s website.

Better terms

When the pair applies as a co-applicant, you can get a loan with better terms than if you applied alone. The lender may enhance the arrangement by lowering the interest rate or other fees. This make the loan more appealing to the couple. When there is a spouse as a co-application, the lender may choose to offer better terms than if there is only one applicant.