Qualifying for a personal loan depends on several factors including your income, credit score, and current liabilities, among others. In some cases, as a primary borrower, you may fail to meet the eligibility criteria to avail of a personal loan because of a poor credit score or inadequate income.
In such a scenario, having a co-borrower (co-applicant) and making a joint application can enhance your overall eligibility. Read on to know how.
Who is a co-applicant?
A co-applicant is an individual who applies for a loan alongside another person. Both applicants share responsibility for repaying the debt. Lenders consider both applicants' credit histories and financial situations when evaluating the application, potentially increasing the chances of approval.
Who can be a co-borrower for a personal loan?
Financial institutions do not allow just anyone to become a co-borrower for a personal loan. Generally, only your spouse or parents can function as your co-borrowers. Some institutions may allow siblings to be co-borrowers. However, you need to find out if your prospective lender has any such provision.
When you add a co-borrower to your loan application, the lender considers the joint income. Thus, if your salary is insufficient, your co-borrowers income bridges the gap. Adding a co-borrower with a large income might also make you eligible for a bigger loan amount at a competitive interest rate.
Essential things to watch out for
While a co-borrower with a good income can certainly boost your personal loan eligibility, there are certain essential things you need to watch out for. Note that it is not only the income of the co-borrower the lender considers but also the credit score.
While the co-applicant having a good credit score can certainly give your eligibility a much-needed boost, a poor score can dent your chances of procuring the loan. Hence, you need to find out if your co-borrower has a good credit score or not.
Also, when applied jointly, the onus of paying the EMIs rests on both of you. If your co-borrower fails to pay their EMI, you must be ready to shoulder your co-applicants payment as it will affect both your credit scores.
Adding a co-borrower – a prudent way to enhance loan eligibility
Not only does having a co-borrower enhance your personal loan eligibility, but it also allows you to avail a larger amount at better rates.
With pre-approved offers from Bajaj Finance on a gamut of loans including housing loans, business loans and personal loans, availing of finance is an easy and hassle-free affair. Know your pre-approved offer by sharing a few basic details.
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