A personal loan can help you tide through all your immediate financial emergencies. However, to qualify for the loan, you must fulfil some basic requirements set by lenders. These include income, credit score, credit utilisation, and more. However, in case you don’t meet these requirements, you can get a co-applicant to boost your loan eligibility.
A co-applicant can be a close family member or a relative who is earning a regular income. Why? Because when you apply for a loan with a co-applicant, the loan is treated as a joint loan. So, if you don’t meet the eligibility requirements by yourself, the co-applicant compensates for it. But does this apply to credit scores too? Let’s take a look.
How credit score requirements work with a co-applicant
Lenders typically check the borrower’s credit score to determine their repayment capacity before approving a loan. So, the higher the credit score, the greater the loan approval chances. Typically, lenders consider a score of 750 points or above excellent and readily approve the loan.
However, if you don’t meet these requirements, getting a co-applicant with a higher credit score to co-sign your personal loan applicationcan boost your approval chances. This is because lenders are assured your co-applicant can make the loan repayments on your behalf (given their lower debt-to-income ratio) if you don’t have the funds to make it yourself. However, if you and your co-applicant are unable to repay the EMIs on time, both your credit scores suffer the consequences.
Now that we know the co-applicant personal loan impact, let’s look at the benefits of having a co-signer with a high credit score.
Benefits of having a co-applicant with a high credit score
- Better loan eligibility: As stated earlier, co-applicants with a higher credit score can boost loan eligibility, thanks to their lower debt-to-income ratio.
- Lower personal loan interest rates: If you didn’t know, lenders consider the borrowers’ credit score before determining the loan interest rate. Usually, borrowers with higher credit scores get lower interest rates since they boast a clean repayment record. Hence, if you don’t have a good enough credit score (above 750 points), you can rope in a co-applicant with a higher score and negotiate lower interest rates with your lender.
Additional Read: All You Need to Know About CIBIL Score
It’s clear that the co-applicant’s CIBIL score plays a big role in boosting the borrower’s loan approval chances and getting attractive interest rates. But choosing the right lender can get you even more benefits like quicker approval times, flexible repayment terms, and more.
If you’re looking for a reputed financier to get a loan, turn to Tata Capital. We offer a multipurpose personal loan on flexible repayment terms and minimal documentation. With us, you can choose the EMI repayment plan that matches your repayment ability. And if you need help calculating your monthly EMIs, simply use our personal loan EMI calculator on our website.