Availing a loan has become a simple and hassle-free process today. However, unless one meets the eligibility requirements, no matter how lenient a lender is, getting a loan will not be possible. Sometimes it is easier to avail a loan when there is a co-applicant involved.
If you are planning to become a co-applicant for a loan or require a co-applicant, our blog will help you understand the benefits and disadvantages of doing so.
A co-applicant, as the name suggests, applies for a loan along with the borrower and shares the responsibility of making the loan repayments. However, not all co-applicants are necessarily the co-owners of the product or service that the loan is being used for.
While both terms are used interchangeably, there is one main difference. While a co-applicant assumes joint responsibility of the loan and is also responsible for its repayment, a co-signer will only act as a guarantor for the loan. A co-signer is liable to repay the loan only if the primary borrower defaults.
Not necessarily. While borrowers will definitely enjoy the advantages of having a co-applicant, only certain types of loans allow co-applicants. These include -
Borrowers commonly take the help of co-applicants for home loans. However, this does not necessarily imply that the co-applicant is also a co-owner of the property
Another popular type of loan where the borrower’s family generally acts as a co-applicant
Since certain personal loans come with strict eligibility criteria, having a co-applicant can help increase the borrower’s chances of availing a loan
Other loans that allow borrowers to apply with co-applicants include auto loans and gold loans.
However, it is important to also note that not everybody can be a co-applicant. Certain lenders only allow blood or immediate relatives to act as co-applicants. Additionally, some lenders also compulsorily require a co-applicant in certain conditions, for example, if the borrower is above a certain age.
There are a number of benefits available to those looking to co-apply for loans as given below -
A major benefit of having a co-applicant for a loan is higher loan approval rate. If a borrower is unable to avail a personal loan for example, due to low credit score or fragmented borrowing history, having a co-applicant with good credit history will help in the approval of the loan application.
Availing certain loans such as home loans come with tax benefits for the primary borrower as well as co-applicant. While a co-applicant is not necessarily the co-owner of the property, he/she can definitely avail the tax benefits of availing a home loan
Having a co-applicant can also increase the loan amount that can be availed. This is especially the case if the co-applicant has a high credit score. Additionally, the interest rate charged may also be lower
Imagine paying lower EMIs! This is what happens if a co-applicant shoulders the burden of loan repayments along with the primary borrower
Despite the number of advantages mentioned earlier, there are a few cons to this process as well -
While a co-applicant with a good credit score can help with loan approval, if there is a delay or default in the loan repayment, then the co-applicant’s credit score will be affected negatively
Additionally, if any one of the borrowers is unable to repay their share of the EMI, the burden falls on the other borrower making it financially challenging for him/her
In case of home loans, unless mentioned specifically or decided previously, the co-applicant may not own the property even if he/she is making the repayments along with the primary borrower.
Having a co-applicant for a loan is usually an advantage due to higher approval rate and sometimes even tax benefits. However, most lenders allow only certain individuals to act as co-applicants such as blood relatives. Before taking the help of a co-applicant or even becoming one, try to understand all the pros and cons involved, read all necessary documents carefully, and then make an informed decision.
In case you are unable to find a co-applicant and require a personal loan urgently, we have some good news for you! Moneyview provides instant personal loans of up to Rs. 10 lakhs at a interest rate starting from 14% per annum. What’s more? They’re known for their high approval rate. Apply here now!
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