How a Co-Applicant Can Change Your Loan Eligibility

Getting a personal loan is a big step. You may want it for some unexpected expense or to reach some big goal. But what if you can’t make that much, or your credit score is too low for you to qualify for the amount you need? Many people face this problem. A great way to solve it is by applying with a co-applicant. But what exactly is a co-applicant, and how do they impact your loan?

A co-applicant may also make a world of difference to your loan application. It can unlock doors that were once closed. But it also carries a lot of responsibility for both. In this blog, we will talk about everything you need to know about having a co-applicant and how it can help you calculate personal loan eligibility more easily.

A co-applicant is someone who applies for a loan with you. They are not only an individual claiming they know you. They are a co-signer on the loan. Your names will be the joint holders of the loan papers, and both of you have to make sure that there is no default or delay in monthly installments (EMIs).

Usually, you can bring on a close family member as a co-applicant (typically your spouse or parent, but also possibly a sibling). Some lenders may also let you include a close family member or business partner as a co-applicant. The co-applicant, in this case, however, must have a decent and steady source of income along with a good credit score.

A co-applicant can be a huge help when you need a loan. They can make your loan application much stronger.

• Get a Bigger Loan Amount: This is the main reason people get a co-applicant. When you apply with someone, the lender will add both of your incomes together. This shows that you have more money coming in each month. With a higher total income, you can get a bigger loan amount. For example, if you wanted a ₹2,000 loan for a small need, you can probably get it alone. But if you need a much bigger loan, a co-applicant can help you get it.
• Higher Chance of Approval: If your credit score is not so good or if your income is a bit low, a co-applicant can save the day. If they have a high credit score and a good income, the lender will feel more confident about giving you the loan. This can change a "no" to a "yes" and help you calculate personal loan eligibility more easily.
• Fewer risks, better approval: They like it when they have less to lose. When two people are responsible for a loan, the risk is lower. Because of this, lenders might give you a better interest rate. A lower interest rate means you pay less money in total over the life of the loan.

While a co-applicant can be a huge help, it is also a huge responsibility for both of you. You must talk about these things very clearly before you apply.

• You Are Both Responsible: This is the most important thing to remember. If you, the main borrower, can't make a payment, the lender will go to the co-applicant to ask for the money. The co-applicant is responsible for the full amount of the loan, not just half of it.
• Impact on Credit Scores: The loan will show up on both your credit reports. If you make all your payments on time, both your credit scores will go up. But if you miss even one payment, both your credit scores will go down. A bad credit score can make it hard for both of you to get a loan in the future.
• Risk to Relationships: Money problems can be hard on relationships. If one of you is not able to pay, it can put a lot of stress on your friendship or family relationship. It's important to have an honest conversation about a repayment plan before you start.

You can't just guess what loan amount you can get. There are some key things you need to look at.

• Combined Income: First, add both your monthly incomes together. This is the new, higher income the lender will look at.
• Combined Credit Score: The lender will look at both your credit scores. The best result is when both of you have a good score. If one person has a low score, it can hurt your chances, so be sure to check your co-applicant’s credit score before you apply.
• Debt-to-Income Ratio: A lender will look at how much debt you both already have. They will add all your existing loan payments together and see how much is left over from your combined income. A lower number is always better.

All these numbers together help you calculate your personal loan eligibility for a bigger and better loan. A company like Stashfin, a trusted personal loan app, offers clear tools to help you check your loan eligibility and understand all your options right from your phone.

Adding a co-applicant to your loan application is a very smart move if you want to get a bigger loan amount or a better interest rate, or if you need to improve your chances of getting approved. In this way, you can get the money you need to make your plans come true. But it is a big decision that comes with a lot of responsibility. Both of you must be ready to work together and pay the loan back on time.