How Does Co-Applicant CIBIL Score Impact Personal Loan Application?
Personal loans are a great way to fulfil unexpected expenses. While the loan process can be easy, you must submit a few essential documents. However, you can apply for a personal loan with a co-applicant if you do not have all the documentation or have a low credit score. This article discusses how the co-applicant CIBIL score impacts your loan application.
Who Can Be A Co-Applicant?
The co-applicant must meet specific criteria if you want to take a personal loan with a co-applicant. For example, some lenders allow siblings to be co-applicants, while others do not. Most lenders consider a spouse to be the best co-applicant. Additionally, there might be criteria that you and your spouse must be earning members.Financial institutions also accept joint applications from family members, including the mother, father, or siblings. Lenders only accept relatives as co-applicants. Co-applicants must have a stable income and match the loan eligibility criteria, such as credit score. It is noteworthy that the repayment period is determined based on the age of the oldest applicant.
How Does The Credit Score Requirement Work With A Co-Applicant?
Lenders typically check a borrower's creditworthiness to determine their ability to repay before approving a loan. The higher the credit rating, the higher the chances of loan approval. Typically, lenders consider a score of 750+.However, if you do not meet these requirements, having a co-applicant with a good credit rating co-sign your personal loan application will increase the loan approval chances. Lenders are confident that co-applicants can make loan repayments on your behalf if you don't have the funds to repay them yourself (due to a low debt-to-income ratio). But if you and your co-applicant fail to repay your EMI on time, it will affect your creditworthiness.
What Are The Benefits Of Having A Co-Applicant With A High Credit Score?
• Better Loan Eligibility:
A co-applicant with a higher credit score can make you eligible for the loan instantly.• Lower Interest Rate:
With a high creditworthy co-applicant, you might have the advantage of getting a loan at a lower interest rate.• Lower Debt-To-Income Ratio:
When lenders consider your application with a high credit score bearer, your combined debt-to-income ratio is presumably lowered, which increases the chances of loan approval.Frequently Asked Questions
Q.1: What are the responsibilities of a co-applicant?
Ans: If the primary borrower defaults on the repayment, the co-applicant is responsible to clear the loan dues. Lenders ensure the combined creditworthiness of both applicants is appropriate and meets at least the minimum threshold. However, the credit score of both applicants affects equally.
Q.2: When should you not use a co-applicant?
Ans: A co-applicant with a similar or a higher debt-to-income ratio does not add much value to your application. In such a scenario, it is advisable not to co-apply for the loan as it can potentially decrease your approval chances.
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