What do the terms “Co-Applicant” and “Co-Borrower” mean?
The individual who applies for the loan with you is known as a co-applicant or co-borrower. This option may be seen on house loan applications if the husband and wife apply for a combined loan. The similar option is currently available for personal loans from several banks and NBFCs.
Together with the principal applicant, a co-applicant is equally liable for loan repayment. The approval is determined by taking into account both applicants’ income and credit ratings. Both applicants will suffer a knock to their credit scores in the event of a default, and both will be accountable for the default.
Who is a Co-Applicant?
A co-applicant is a party who is able to co-sign on for the obligation of a Personal Loan. For many years now, getting a personal loan with a co-applicant has been especially common for house loans, with a spouse being the most popular option. Recently, it has become more common for couples to co-apply for personal loans with their spouse. This indicates that the eligibility of both applicants will be evaluated, as well as their combined eligibility for a personal loan.
Who can be a Co-Applicant?
Co-applicants for Personal Loans most frequently include spouses. To co-apply for a personal loan, though, you can include your parents, siblings, or kids.
What is the role of a Co-applicant?
A co-applicant is accountable for the Personal Loan repayment to the lender, to put it simply. The income level and credit rating of both applicants are taken into account during the application procedure to determine eligibility for personal loans. Similar to this, both partners’ credit scores will be affected if they fail on the personal loan, and the lender has the authority to take legal action against either party if it sees fit.
How would a Couple’s Co-Application help?
1. Increase in Income
In compared to filing a single loan application, it helps to increase the loan application’s overall income level, which might lead to you getting a bigger loan amount. Consider the scenario where the lender provides you a personal loan with a maximum of 25,000 Lakhs over five years and your monthly salary is 100,000 Lakhs. The lender will consider both applicants’ salaries if you add your spouse, who makes a comparable amount ($10,000 yearly), and may be able to provide a larger loan because the applicant’s total income has grown.
2. Credit Score
It’s crucial to realise that adding your spouse as a co-applicant on the loan application helps to further boost the credit score since the credit score is one of the primary factors determining whether a Personal Loan is accepted or denied. For instance, having a co-applicant with a good credit score may increase your chances of getting the loan approved if you have a low credit score for a variety of reasons.
3. Responsibility for Repayment
If you want to include your spouse as a co-applicant on the loan, this gives the lender some peace of mind because both applicants are jointly responsible for repayment. The weight of duty and repayment may always be shared. It will assist in dividing the tax advantage associated with the interest component as well.
What Benefits Can a Co-Applicant Offer?
- Greater Loan Amount
There is still a chance for you to obtain the necessary loan amount if your low income or poor credit prevent you from receiving the desired personal loan amount. And you may accomplish this with the aid of your co-applicant, whose income raises the loan’s eligibility. Before disbursing the loan amount, the joint personal loan requests the income of both the primary and co-applicant.
- Joint EMI
The EMI load would be shared by both because it is a joint loan. Thus, you may simply repay the loan by dividing the EMIs.
Which Bank Provides a Joint Personal Loan?
| Banks | Loan Amount | Interest Rates |
| SBI | 20 Lakh | 10.35%-14.75% |
| HDFC Bank | 15 Lakh | 10.75%-21.45% |
| Axis Bank | 15 Lakh | 12.00%-24.00% |
| Kotak Mahindra Bank | 20 Lakh | 10.99%-20.99% |
| ICICI Bank | 20 Lakh | 11.25%-18.49% |
| IndusInd Bank | 15 Lakh | 11.00%-16.00% |
| Punjab National Bank | 10 Lakh | 9.20%-12.05% |
| Canara Bank | 3 Lakh | 11.80%-13.85% |
| Bank of Baroda | 5-10 Lakh | 10.50%-15.50% |
Are there any difficulties with submitting a Co-Application for a Personal Loan?
- Obtaining a co-applicant: Lenders permit your parents, spouse, siblings, and children to apply as co-applicants. It is pointless to list your parents as co-applicants if they are retired or have poor credit, though.
- More applications will inevitably result in twice as much work: It will take additional time and effort to fill out the data for both candidates.
- A co-application loan may take longer to approve than a typical personal loan, which is often authorised and disbursed in less than 24 hours. Given that there will be two sets of paperwork to review, the lender may need to take additional time processing the application.
- Reaching an understanding on loan repayment: Having a co-applicant is excellent, but sharing accountability results from a joint application. Your loan can be approved with a co-applicant, but what happens if you can’t convince them to accept joint responsibility for the EMIs or in the case of default? The loan will thereafter be entirely your responsibility to repay. Given that his risk increases and the interest is not completely safeguarded, the lender might not consent to such a plan.
- The feature is lender-specific: This co-application option for personal loans is not provided by all lenders. If you and your lender have an excellent working relationship, you might be able to ask for the same. Many of the online fintech lenders do not include a co-applicant option in their applications. If you are considering a co-application, be sure the lender has the necessary policies in place to support it.