How A Co-Borrower Can Increase Your Personal Loan Eligibility?

A personal loan can be one of the best, easiest, and most hassle-free ways of getting some quick cash when one is falling short of money. It can be used to cover for anything from critical surgeries to an urgent home repair to paying college fees when money is running tight to even funding some unforeseen increases in wedding expenses. 

Since a personal loan is not collateralized, lenders typically prefer borrowers with a good credit history and a high CIBIL score. 

A CIBIL score reflects the borrower’s credit history and helps lenders determine whether the person should be lent money or not. In other words, the CIBIL score tells a lender whether the borrower has the ability—and the intent—to repay the money in time or not.

The CIBIL score can range from 300 to 900. Good lenders typically prefer borrowers with a score of 750 or higher. Such people tend to get the best interest rates and several valued-added services from lenders. 

Even a person with a lower CIBIL score can get a personal loan, albeit at a higher rate of interest and with more stringent scrutiny of their credit history. Typically, lenders do not tend to lend to people with CIBIL score of less than 550.

So, how can a person with a low CIBIL score and a less than average credit history hope to improve their chances of getting a personal loan?

Well, one of the ways in which a borrower can do this is by getting a co-applicant who has a much better credit history and a significantly higher CIBIL score than them. 

A co-applicant with a better credit score can help improve the overall credit score of the two borrowers and can improve their chances of getting the loan. 

Borrowers applying as co-applicants should note that both would be equally liable to pay back the loan. If the original borrower delays repayment or defaults on it, the lender can ask the other applicant, with the higher CIBIL score, to make good the payment. 

While a co-applicant with a better CIBIL score can help improve one’s chances of getting a loan, the converse can also be true. If the co-applicant has a less than impressive financial history and has delayed or defaulted on repayments, then this can actually dampen the chances of the application being accepted. So, one should be careful while choosing a co-applicant. 

Conclusion

If you have a less than ideal credit history, getting a co-applicant with a better credit score can improve your chances of getting a personal loan. 

Reputed lenders like IIFL Finance typically offer the most competitive interest rates to people with the highest credit scores. The non-banking finance company offers personal loan ranging from Rs 5,000 to Rs 5 lakh via a fully online process that requires minimal documentation.

So, if you think your chances of getting a personal loan are low, you should try and get a close family member like a parent, a sibling or your spouse or for that matter a close friend or even a colleague with a good credit history and a high CIBIL score, to become a co-applicant.