Personal Loan with a Co-borrower: Everything you need to know

When do you need a co-applicant for a personal loan?

Usually, adding a co-applicant for a personal loan is a choice that many people opt for. However, in some cases, having a co-applicant becomes mandatory for your loan application to get approval. Some of the common scenarios are:
 

• Average income

  Income plays a crucial role in loan approval. The lender will not sanction a loan if you earn less than Rs 15,000 per month, your company is not listed or your employer does not credit your salary on time. A co-applicant can help you cross this income barrier. But before adding a co-applicant, make sure they have a steady source of regular income either through monthly salary or business.

• High debt-to-income ratio

  Never assume that having a higher salary will automatically qualify you for a loan. Consider the following scenario: you earn Rs 80,000 per month. But you also have several debts to repay, like a car loan, a two-wheeler loan, home loan, consumer loan, credit card bill or any other personal loan. In this case, a lender may reject your loan application.  But having a co-applicant with good credit history and repayment capability will help you in getting the loan approved

• Lack of credit history

  If you have never availed a loan and do not even have a credit card, your credit score will be displayed on the credit bureau site as 'N/A,' which means not applicable. A lack of credit history makes analysing your credit behavior difficult for the lender. In such a situation, if you require a large sum of money through a personal loan, then you must consider adding a co-borrower whose credit history is good.

• Higher age

  If you are approaching retirement age and do not have pension or other steady flow of income then also the lender reserves the rights to reject your loan application. In such cases, applying for the loan with a co-applicant, usually your son or daughter is recommended for quick approval. You must also consider loan insurance while applying for such a loan.
   

Also Read: 6 Foolproof Tips That Can improve Your Personal Loan Application
 

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

A direct relative is usually allowed to sign as a co-borrower on the application. You can include your spouse, independent children, parents, and unmarried siblings in your application. In case you want to apply for a loan with a friend or distant relative, you must check with your lender to see if they allow it.
 

What pointers should you consider before applying for a personal loan with a co-applicant?

Choosing your co-borrower without proper knowledge and research might lead to loan rejection. You must consider the following points before adding a co-applicant’s name to your loan application -

• Your co-borrower should have a good credit score, a steady source of income, and have a stable job or a steady business.
• If you fail to secure the repayment of the loan, then the onus of bearing the EMIs falls upon the co-applicant. The co-applicant is equally liable to repay the loan.
• A personal loan with a co-borrower involves two borrowers, and both are required to provide the same set of documents. As such, loan disbursement takes a little longer.
• If the borrower defaults and their liability become unmanageable, then credit score of both the borrowers will suffer.
• In case, you are applying for a personal loan with your spouse, make sure to ask the lender the options to transfer the loan in case of separation.
• Make sure to consider, loan insurance for your personal loan. In the case of sudden job loss, temporary disability, or accidental death of the primary borrower, repaying the personal loan in monthly installments can become a challenge. Availing a personal loan protection plan can help.

What are the eligibility criteria for a joint personal loan?

Joint personal loan eligibility criteria are the same as a single applicant loan. Here are the specifics.
 

Parameters	Description
Citizenship	A joint applicant must be a resident Indian.
Minimum age	21 years
Maximum age	58 years
Minimum monthly income	Rs 15,000
Experience	Six months with the current employer (for salaried) Two years in existing business (for business owners)
Documents	Address proof Income proof Income certificate  Passport size photograph Employment or business continuity proof

 

How to apply for a personal loan with a co-applicant?

The application process is the same whether you are applying alone or with a co-borrower. You must visit the branch office of the lender of your choice with the joint applicant, fill out the application form, and submit the necessary documents requested by the lender. You may further apply with the lender's associated DSA. 
 
If you want to apply online, simply go through the following steps.

• Visit the official website of the lender.
• Share the requested information and upload your KYC documents.
• The lender will verify both the applicant's details, and if the information is found to be satisfactory, funds will be disbursed shortly after the completion of a few more steps.

Also Read: Key Points to Take into Account Before Becoming a Loan Guarantor

To conclude

Adding a co-applicant is a smart way to increase your eligibility for joint personal loans. Since the primary borrower's repayment liability is significantly reduced in a joint personal loan, securing funds at a lower interest rate is much easier in a joint loan application. However, you must ensure that your co-applicant for the joint personal loan has a good credit history and a steady source of income