Finance

Getting a Co-Applicant for a Personal Loan: What You Need Know

Personal Loan

Over the last few years, personal loans have gained much traction, as more borrowers have started to undertake it as a form of debt. This rise is due to the many benefits that come with it. Personal loans have several advantages, like quicker and hassle-free financing and easy, flexible repayment tenures of up to 5 years.

These loans are even more beneficial if it is Fullerton India instant personal loans as you can get financing up to Rs 25 lakhs in just 24* hours, providing you meet the eligibility criteria and if your documents pass all verification checks. The loan amount does not have any restriction on end usage. The loan is sanctioned quickly, requires minimal documentation, and requires security in collateral.

You can check the maximum loan you can take using a personal loan eligibility calculator. What if you don’t meet the loan eligibility? How can you improve it? In such cases, if A co-applicant agrees to bear the financial responsibility of the loan along with you, you can get higher loan eligibility. Meaning, both parties are equally responsible for the repayment of the debt.

Many people often confuse co-applicants for co-signers. The two are not synonymous. Co-applicants share the financial responsibility with you throughout the loan. On the other hand, co-signers are guarantors who are essentially vouching for you and are responsible for paying back the loan in case you fail to make payments. The following are a few things you need to know about co-applications before being one for Fullerton India’s instant personal loans – 

When Should You Get a Co-applicant?

Since both you and the co-applicant will undertake the financial responsibility of the loan, the most reasonable thing to do is have someone who will also benefit from the loan. For instance, you want to take a personal loan for home renovations, and you can make your spouse a co-applicant on loan to get a better interest rate. Or, if you want to take a personal loan for business-related expenses, it is a financially wise decision to take it as co-applicants with your business partner to get better terms. 

What are the Benefits of a Co-application?

One of the best parts about applying with a co-applicant is that you can share the responsibility of repayment. Although in case of a default, both applicants’ credit is negatively impacted. However, it creates a safety net for both of you as they can rely on someone in case of a financial crisis. 

When you apply for a personal loan, lenders go over several things to determine your creditworthiness and repayment capacity. Some of these factors include: 

  • Credit History 
  • Credit Score 
  • Income 
  • Debt-to-income Ratio 
  • Relationship

Assessing these factors then helps them decide your loan amount, tenure, and personal loan interest rates. When applying with a co-applicant, you get to qualify for the best possible terms of the loan. This is because you and your co-borrower can have different strengths in your financial profile, which can help you get a better loan offer when combined. For instance, your co-applicant may have a better credit score, and you can use it to both your benefits to get your loan sanctioned at a lower interest rate or other loan terms that are more favourable.

Since two applicants are involved, your income can help you obtain a more significant loan amount from the lender. It is due to your application exhibiting higher repayment capacity than a single borrower application would. Hence, making you less of a threat to the lenders in terms of disbursement. 

What are Some Challenges of Personal Loan Co-applications?

While there are a lot of benefits of co-applications, such as personal loan interest rates and more flexible terms. Nevertheless, like with everything else, it has a few challenges as well. You always hear people say not to mix personal relationships with finances, which can be a tricky thing to deal with for co-applicants. To avoid any severed relationships due to money, you must ensure that your co-borrower is a close family member. In addition to this, you may face other challenges, such as the co-applicant not keeping up with the payments or going through a financial crisis. In such instances, the entire responsibility may end up falling on you.

These issues can cause significant detriments to your financial health, but you can easily avoid them. One of the best ways to do so is by not rushing into anything. In case something goes south, both you and your co-applicant may suffer from a lack of credit extension opportunities in the future. Hence, no matter how urgently you need the funds, do not agree to a co-borrowing loan without thoroughly assessing the situation and its consequences first. 

If you are on the lookout for a personal loan but want to share the responsibility, get started with your co-application process as soon as possible. And avail better personal loan interest rates, tenures, and flexibility.

About the author

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Miller Willson

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