A Personal Loan is the most popular mode of borrowing funds. It comes with competitive interest rates and has zero limitations on fund usage. They are helpful to fund almost anything, ranging from emergency expenses to a grand wedding. Depending on your eligibility and income levels, you can yourself of a Loan that may be as low as Rs. 50,000 or as high as Rs. 50 lakh.

Borrowing a large amount as a Loan is challenging to repay. However, having a co-applicant when Personal Loan apply removes the pressure. A co-borrower is someone who applies for the Loan along with you. They share equal responsibility for repayment and positively affect your eligibility.

Impact of co-applicants on Personal Loan eligibility

Adds to your income

Joint applications consolidate the income in favour of Loan eligibility. If you earn a low income, you can consider combining your and your co-applicant's earnings, potentially increasing income and repayment capacity. A co-applicant also helps you borrow a higher Loan amount.

Supports credit scores

The co-applicant’s credit score does not improve yours. However, if your co-borrower's high score helps you fulfil the eligibility criteria, especially if it is below par. So, select a co-applicant with a favourable credit score to get Instant Loan approval. Before finalising the scheme, ask your co-borrower to check their creditworthiness.

Improves repayment capacity

Co-applicants share repayment responsibilities, assuring the bank they will repay the EMIs on time. It also reduces the financial burden on your monthly budget. Additionally, the tax benefits earned on the interest component are divided between co-applicants.

Reduces the debt-to-income ratio

Joint applicants result in a lower debt-to-income ratio. Existing debts can affect the chances of Loan application being approved. When combined, the primary and co-applicant gives the bank a stronger financial status.

Provides competitive interest rates

Banks offer reduced interest rates for Joint Loan applications owing to increased repayment assurance and income level, better credit history, etc. You can also utilise the Personal Loan eligibility calculator to check how much you need to borrow.

Are co-applicants necessary?

Adding a co-applicant before applying for a Personal Loan in India is not compulsory, but a safer bet. However, you may not need one if you borrow an affordable amount. Remember, the co-applicant is equally responsible for repaying the EMIs as you. If the person is trustworthy and has a positive credit history, consider adding them as co-applicants to reduce the overall burden.

Conclusion

Co-applicants’ involvement can impact Personal Loan eligibility, with their creditworthiness and financial standing playing an important role. Understanding the impact of a co-applicant in Loan applications is crucial when navigating this landscape. Select your co-borrower wisely and check their income and repayment capacity before finalising the deal.