Can a Co-Applicant Help You Get a Better Personal Loan Deal?

Personal loan approval depends on multiple factors, including credit score, EMI to NMI ratio, income, job profile, co-applicant, etc. Among these, adding a co-applicant plays a very important role. Adding a co-applicant with a better credit profile can improve your loan eligibility and enhance the chances of loan approval. The lender evaluates the creditworthiness of the co-applicant, which helps the primary borrower avail lower interest rates, higher loan amount and better terms.

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What is a Co-Applicant in a Personal Loan?

A co-applicant is an individual who is equally liable to make repayments along with the primary borrower. The lender evaluates the combined credit profile of both borrowers to determine their eligibility. The spouse, parents, sibling or children of the primary applicant can act as a co-applicant.

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Who Can Be a Co-Applicant?

A close family member of the primary applicant can be the co-applicant. These include:

Spouse
Siblings
Parents
Children

Difference Between Co-Applicant, Co-Borrower and Guarantor

A co-applicant and a co-borrower are usually the same. A guarantor has a striking difference from the two of them. Let us see how:

Co-applicant/Co-borrower	Guarantor
Applies jointly for a loan.	Does not apply jointly for a loan.
Equally liable for repayments as the primary borrower.	Liable only if the primary borrower defaults.
Credit score is impacted in case of delayed payments or default.	Impacted only if they have to pay off a defaulted loan.
Their income, combined with the primary applicant's, increases the loan eligibility.	Their income does not play any role in boosting their loan eligibility.

How Does a Co-Applicant Affect a Personal Loan Application?

A co-applicant affects the personal loan application in the following ways:

Adding a co-applicant with a strong credit profile increases the loan approval chances in case the primary applicant has a weak credit profile.
The combined income of both applicants increases the loan amount eligibility.
Adding a co-applicant with a strong credit profile also helps in availing personal loans at a lower interest rate.

Benefits of Adding a Co-Applicant to a Personal Loan

Higher Approval Chances

Applicants with a weak credit profile or first-time borrowers can add a co-applicant with a strong credit profile and improve their chances of loan approval. Joint applications carry a lower credit risk since both applicants are responsible for EMI payments.

Higher Loan Amount Eligibility

Applicants with a low EMI/NMI ratio usually do not qualify for a personal loan. Adding a co-applicant with a higher income increases the loan amount eligibility and improves the loan approval chances.

Better Interest Rates

The combined credit profiles of both applicants qualify them for a lower interest rate.

Benefits for Senior Citizens

Individuals applying for a personal loan in their 60s are usually offered a shorter repayment tenure due to the maximum age limit set by the lenders for loan repayment. Adding a young earning co-applicant to their personal loan can help them get a longer loan tenure and improve their loan approval chances.

Can a Co-Applicant Help You Get a Lower Interest Rate?

Yes, a co-applicant with an excellent credit profile may help get a lower interest rate. The income, credit score and the EMI/NMI ratio and job stability of both applicants can help them avail a lower interest rate.

How a Co-Applicant Can Increase Your Loan Amount

Lenders usually assess the loan amount eligibility of the applicant based on their repayment capacity. The EMI/NMI ratio of the applicant should usually be between 50-55% to qualify for a personal loan. Individuals exceeding this limit may not usually qualify for personal loans, especially if the applicant comes in the lower income bracket.

In case the primary applicant has a lower income, the income of the co-applicant combines with the income of the primary applicant and increases the loan amount eligibility.

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FAQs

Can a co-applicant increase personal loan eligibility?

Yes, a co-applicant with an excellent credit profile can help increase the personal loan eligibility.

Does a co-applicant improve loan approval chances?

Yes, a co-applicant with a strong credit profile improves the loan approval chances.

Can adding a co-applicant reduce personal loan interest rates?

Yes, a co-applicant having a strong credit score, lower EMI/NMI ratio, higher income and a stable job can reduce personal loan interest rates provided other criteria remains strong enough.

Who can become a co-applicant for a personal loan?

An earning family member of the primary applicant, including the spouse, parents, children and siblings, can become a co-applicant.

Is a co-applicant responsible for loan repayment?

Yes, a co-applicant is equally liable for loan repayments just as the primary applicant.

What credit score should a co-applicant have?

A co-applicant with a credit score of 760 and above increases the chances of loan approval.

Can a co-applicant help get a higher loan amount?

Yes, a co-applicant with a higher income and a lower EMI/NMI ratio can help get a higher loan amount.

Does a co-applicant's income matter?

Yes, a co-applicant’s income matters. It might affect the loan amount eligibility of the applicant.

Can a co-applicant be removed later?

It is usually difficult to remove the co-applicant from your loan since the loan was approved based on the creditworthiness of both applicants.

Is a co-applicant the same as a guarantor?

No, the co-applicant is not the same as the guarantor. The guarantor becomes liable to repay the loan only when the primary borrower defaults whereas the co-applicant is equally responsible for the loan repayment.