Has your personal loan application been rejected? Want to get instant approval for your personal loan? Then applying for a Joint Personal Loan is the best alternative. Moreover, getting an instant personal loan becomes easier if you do so with a joint venture. Be it a guarantor or a co-applicant, we all have help if we learn to ask. But how do a guarantor & a co-applicant differ and help you with EMI payment? Will a co-applicant or a guarantor ease your burden on repayment or credit score?
Read More, as this article will clarify and help you choose the wiser options while availing of a Joint personal loan.
A joint personal loan can benefit you when you have inadequate income or no credit history to obtain a loan. Having a trusted individual as a co-applicant or a guarantor, mostly your family or friends, can help you assure the lender that the loan will be repaid. Moreover, the probability of defaulting on a loan can be slightly reduced when you apply for a loan using a joint personal loan. However, the debt becomes an added responsibility to the co-applicant or the guarantor you choose. Hence, it is important to understand the difference between a co-applicant and a guarantor, mostly the role they play in terms of accountability of the loan.
Who is a Co-applicant?
If your loan application has been rejected, you can still apply for a personal loan with a co-applicant or guarantor (also known as Joint Personal Loan). A co-applicant is someone with whom you apply for an instant personal loan. This enhances your loan approval and eligibility if your co-applicant has a good income & credit score.
The next question is, who can be co-borrowers? In most scenarios, it is usually the family members, like your spouse or parents. Of course, some lenders allow your siblings to be allocated as co-applicants.
Similarly, if the co-applicant has a bad credit score or bad income proof, the chance of availing of a loan is likely low. Here, a default will affect both scores.
Who is a Guarantor?
Usually, banks require guarantors before they approve any personal loans. A guarantor is a person or institution liable for the loan as a principal borrower. Moreover, a guarantor gives consent to the lender that they will be backing the borrower in case of defaults.
But not every personal loan is a “guarantor” personal loan. Banks and other financial institutions prefer guarantors with a good income of over Rs. 25,000 to qualify for consent.
A guarantor should be aware of the consequences of the loan default and will bear the responsibility of repayment in case of the borrower default. A guarantor loan is an unsecured loan whose signature is mandated on the credit agreement.
Also Read: A Comprehensive Guide for Getting a Personal Loan in Bangalore!
Co-applicant vs Guarantor: What’s the difference?
|Lending Terms||A co-applicant improves the loan eligibility criteria for a higher loan amount. However, the lender will thoroughly examine the income and credit history of each co-borrower before approving the loan.||A guarantor or a co-signer is required only when the primary borrower does not fit the eligibility criteria due to low credit rating. So, an individual who guarantees a loan as a co-signer must have a high credit rating. A high credit score of the guarantor will help the primary borrower to avail personal loans at a lower interest rate.|
|Repayment||The loan repayment is a joint responsibility of the primary borrower and the co-applicant.||A guarantor is not responsible for paying any EMIs. A guarantor takes responsibility only when the borrower fails to repay the loan.|
|Tax Benefits||For a joint business loan, if the co-applicant happens to be a co-owner of the business, then he/she is eligible to claim tax benefits. However, if a co-applicant does not share any ownership, he/she cannot claim tax benefits.||A guarantor cannot claim any tax benefits.|
|Ownership||In case of a joint business loan, a co-borrower’s name will appear on the loan documents. And both the primary borrower and the co-borrower will be the rightful owners of the property when the loan repayments are completed.||A guarantor is not involved when it comes to ownership rights.|
Role of a Guarantor If you Default on your EMIs
Any bank or financial institution requires a guarantor for loan approval or disbursal. The person who signs up as a guarantor will be responsible for the loan as a principal borrower.
The role of the guarantor:
If you are likely to pursue the role of a guarantor for your friend who needs an instant personal loan at the earliest, here is what you should know. You are giving consent to the lender that you’ll be financially backing the borrower in case the borrower defaults.
If you or your borrower forgets to pay your instalment or decide not to pay the loan, it will be the sole responsibility of the guarantor. If the guarantor fails to pay the outstanding amount, the bank will file criminal proceedings against them. In return, this will hurt credit rating. CIBIL keeps track of guarantors and borrowers in case of defaults. Finally, even if the guarantor has always been prompt with his loan repayments, his rating will still take a hit from the loan he has given consent to get defaulted.
A Joint Personal Loan with a Guarantor
Sometimes, the banks approve additional loans to the principal borrower or guarantor without written consent. It naturally goes to the guarantors’ pocket who intend to help out. Thus, it is a bold and risky decision to be a guarantor in an unsecured personal loan. One should carefully examine the loan requirements and details of the actions in case of default. One should only become a guarantor if the capacity holds safe for complete repayment & intentions of the borrowers.
Read more: Make Life Easier With No Charge EMI!
Role of a Co-applicant if you Default on your EMIs
Who will not like extra support while applying for an instant personal loan? Especially if it means including your spouse too. Co-applicant’s hand makes it easier for the approval of a heavy amount of loan.
The role of a co-applicant:
A co-applicant applies along with the applicant from a bank or financial institution. They accept the equal responsibility of repaying the instalment on time if the borrower doesn’t pay. So, only co-owners can become co-applicants. In this case, the co-applicants are none other than your spouses or, in some cases, parents. However, it can be simple, whereas father & son, husband & wife, parents and unmarried daughter can also apply as a co-applicant. Therefore, it serves well if you’re availing of an instant personal loan for buying a new home or home refurbishment.
Sometimes buying a house of more significant value will need a joint money venture to meet the eligibility criteria and quick approval. Since the applicant and co-applicant have equal responsibility for the instalment repayment, it is reasonably necessary for both to know the liability of payments. A joint loan account is based on both individuals’ credit reports. If the applicant loses a chance to repay the EMI on time, the negative credit report will report to your co-applicant. Hence, the negative plunge in credit scores is unified via a joint loan account.
A Joint Personal Loan with a Co-applicant:
It’s a rule by an application that both the applicant & the co-applicant should ensure paying back the EMIs on a due date regularly. Checking your CIBIL report and score regularly will help you understand your credit history and journey.
If your credit report shows a default in one of the EMIs, take measures and apply efforts to improve it before the tenure closes. You should enhance it before you apply for another loan.
Lastly, your next loan will leave you with a hassle-free journey to owning your instant personal loan and your dream home.
Also Read: Simple Ways to Pay Off Your Personal Loan Quickly
Why Choose Joint Personal Loans?
Have a higher chance of loan approval:
Joint personal loans boost the chances of getting your loan approved when your co-applicant or the guarantor has a high credit rating.
You can borrow more:
As lenders consider the financial status of both applicants’ (like income and credit history), you will be eligible to avail of higher loan amounts compared to applying alone.
Consolidate a larger debt:
Availing of a joint personal loan can help consolidate debts with higher loan amounts. If you and your co-borrower have a debt to repay, this is a smart way to do it.
Cover the cost of a shared asset:
If you want to cover the cost of a shared purchase, a joint personal loan can be the best way to help make repayments easier and stay on track to paying off the debt.
How to Apply For Joint Personal Loan?
Many banks and financial institutions offer joint personal loans online. Here are the steps to avail of a joint personal loan:
Check eligibility requirements:
Firstly, check credit score requirement of your lender and make sure you and your co-borrower meet the required criteria. However, remember that your lender will also consider your and your co-borrower’s income and credit histories.
Pre-qualify with multiple lenders:
Both you and your co-borrower pre-qualify or check your estimated loan amount before getting one with multiple lenders. Moreover, pre-qualifying does not reduce your credit score.
Compare lenders and apply:
Before applying for the loan, evaluate the APRs, repayment terms and potential charges, including origination and late fees, associated with each joint loan offer.
Applying for the loan:
Once you compare all the criteria, apply for the loan that suits your requirements and repayment ability.
Submit the Documents:
Lastly, you will have to submit the required documents, which the lender will verify. After verification, your loan will get approved, and the amount will be credited to the borrower’s bank account.
Joint Personal Loan Eligibility Criteria
Both the applicant and the co-applicant/guarantor must be Indian citizens.
- The age of the applicants must be in the range of 21 to 60 years.
- Applicants must have a credit score above 750.
- Applicants must have a minimum of 1 year of work experience.
- A minimum income of Rs. 25,000 is required to be eligible.
Joint Personal Loan Documents
Both applicants have to submit a few documents, which includes:
- Aadhaar cards
- PAN cards
- Salary slip or income proof of last three months
- Bank statements for the last six months
Top Banks That Provide Joint Personal Loan
Top banks that offer joint loans to meet unexpected financial emergencies are mentioned below.
|List of Banks||Loan Amount (INR)||Interest Rates (p.a)|
|SBI||Up to 20 Lakh||10.35%-14.75%||Apply Now|
|HDFC Bank||Up to 15 Lakh||10.75%-21.45%||Apply Now|
|Axis Bank||Up to 15 Lakh||12.00%-24.00%||Apply Now|
|Kotak Mahindra Bank||Up to 20 Lakh||10.99%-20.99%||Apply Now|
|ICICI Bank||Up to 20 Lakh||11.25%-18.49%||Apply Now|
|IndusInd Bank||Up to 15 Lakh||11.00%-16.00%||Apply Now|
|Punjab National Bank||Up to 10 Lakh||9.20%-12.05%||Apply Now|
|Canara Bank||3 Lakh or 12 times of monthly income||11.80%-13.85%||Apply Now|
|Bank of Baroda||Up to 10 Lakh||10.50%-15.50%||Apply Now|
Final TakeAway: Co-applicant or Guarantor- Which to choose?
Personal loan eligibility is always dependent on you. However, a co-applicant and a guarantor serve as a catalyst & consent in a loan approval. And, to decide whether you should choose a co-applicant or a guarantor for your joint personal loan, consider the following factors:
- Evaluate your personal loan repayment ability.
- Confirm if you want to share property ownership.
- Choose based on your credit score and credit history.
I hope this article has helped you understand the key responsibilities of a guarantor and a co-applicant and what the consequence proves in case of default. Also, you can apply for a personal loan using Buddy Loan, one of the trusted loan aggregators in India. Moreover, Buddy Loan helps you avail of personal loans at lower interest rates starting at 11.99%p.a., with flexible EMIs to make your repayments easier.
Have any queries? Do reach us at email@example.com
Can I get a personal loan with a co-applicant?
Yes, you can get a personal loan with a co-applicant. If you have a low credit score and want a personal loan, one of the best alternatives is to get a co-applicant with a high credit score. This will improve your chances of getting a loan. A co-applicant can be your spouse, family, friends, etc.
How do I apply for a joint personal loan?
Firstly, the co-applicant must satisfy the required eligibility criteria mentioned by the bank. They must have a good income and a credit score above 750. Once you qualify for the eligibility, you can apply for the loan with your co-applicant/guarantor by submitting the required documents.
Can personal loans be in joint names?
Yes, a personal loan in joint names is usually known as a Joint personal loan. And to apply for a joint personal loan, you must get a co-applicant/guarantor. The co-applicant can either be your spouse/family member, or friend. However, remember that both applicants will be liable for the loan repayment when you apply for a joint personal loan.
Is it a good choice to apply for a loan with a co-applicant?
Applying for a personal loan with a co-applicant can increase the chances of loan approval and also lower interest rates. Moreover, you can avail of a higher loan amount than applying alone. Hence, getting a joint personal loan is the best option if you have a poor credit score.
Does being a co-applicant affect my credit score?
Being a co-applicant of a loan will not affect your credit score. However, your credit score will be negatively affected if the primary borrower misses out or does not make timely repayments.
How Does a Co-applicant Impact Your Personal Loan Eligibility?
- Your co-applicant can increase or reduce your credit score, which is essential for your personal loan eligibility.
- However, your co-applicant is liable to share the repayment of the loan amount with you. And if your co-applicant defaults on the EMI payment, it can reduce your credit score.
- On the other hand, if the co-applicant has an excellent credit score, it can improve your loan eligibility and benefit you.
- When you apply for a joint personal loan with a co-applicant, the lender considers both applicants’ income and credit history to determine eligibility. Therefore, when you have a low income, your co-applicants income can bridge the gap and boost your personal loan eligibility.
- When your co-applicant has a high credit score or income, you can easily get a higher loan at lower interest rates.