When Do You Need A Personal Loan Co-applicant or A Guarantor?

Personal loan is one of the most common type of loan to meet various personal needs. Read to know about when does an individual need a co-applicant or guarantor.

21 Nov,2022 11:13 IST 23
When Do You Need A Personal Loan Co-applicant or A Guarantor?

A personal loan is the most common type of borrowing one resorts to for meeting short-term needs. It is a form of unsecured credit and so lenders need to assess the loan applicant’s ability and inclination to repay. To be sure, there is no way one can tell if a person borrowing the money will pay even if he or she has the means to do so. But, one way that lenders seek to evaluate borrowers is by looking at their past history. This is by checking their credit scores.

The credit score is a three-digit number that varies between 300 and 900, with a higher score indicating more creditworthiness and vice versa. Lenders also look at the applicant’s income to approve a loan amount, particularly the size of the advance.

If a person with a low credit score applies, he or she may not have the wherewithal to pay back given the income but a lender could still lend to such people by including a co-applicant or a guarantor.


A co-applicant can help in various ways including pushing up the eligibility for the loan amount and also counterbalancing a low credit score of the primary borrower.

• Eligibility:

Typically, lenders have an upper limit of around Rs 5 lakh to lend as a personal loan. This could go up or down, based on the income profile of the person. However, if one requires a higher amount, say Rs 7 lakh, one can include a co-applicant to draw a larger sum.

• Score:

If a person has a low score, he or she may find it difficult to get a personal loan sanctioned. If one includes a co-applicant, provided the other person has a higher credit score, the lender gets a comfort level that the loan will get repaid.


A guarantor comes, as the name suggests, as an insurance factor for a loan. The guarantor himself or herself doesn’t pitch in for paying the equated monthly instalments (EMIs). Indeed, as a ‘guarantor’ the role implicitly is limited as a safety valve for the loan account.

The guarantor may be required in a few cases:

• Eligibility:

Just like in the case of a co-applicant, a guarantor can push the eligibility for a person making the loan application when he or she has a lower income than the threshold deemed right for a lender, or the primary applicant doesn’t have a strong credit history and thereby a high credit score.

• Special Cases:

A loan guarantor may also be required in certain cases like an NRI trying to get a loan in India. The lender may insist on getting a local guarantor as a mandatory requirement.


A personal loan is a type of collateral-free debt. So, lenders assess the loan application by looking at the credit score. A low credit score can affect the fate of a personal loan and in some cases it can get rejected. But by bringing in a co-applicant or a guarantor, one can borrow a larger sum and get a loan sanctioned even if one person has low credit score.

Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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