Availing of a loan with a co-applicant comes with a host of benefits. If your co-applicant has a steady income and a high CIBIL score, you can qualify for a bigger loan amount and more attractive personal loan interest rates.
Why, yes! So, if you are co-applying for a loan, read on to understand how your co-applicant’s credit score impacts your loan eligibility.
How do CIBIL scores work?
The Credit Information Bureau (India) Limited or CIBIL assigns each individual a credit score after considering their detailed credit information. Your CIBIL score represents your creditworthiness on a scale of 300 to 900. Here, the higher your score, the more your chances of securing a loan at favourable terms.
Typically, a score over 750 is considered excellent by the lenders.
Impact of your co-applicant’s CIBIL score
- Applying for a personal loan with a co-applicant who has a good CIBIL score can boost the chances of your loan getting approved.
- You can be eligible for more competitive interest rates and a higher loan amount. Conversely, a co-applicant with a low CIBIL score can lower your loan approval chances.
- Your co-applicant’s score doesn’t affect your CIBIL score in any way.
- When you co-apply for a loan, you share the burden of loan repayment. If either of you fails to repay the loan timely, it negatively affects your and your co-applicant’s CIBIL score.
How to select a co-applicant?
Typically, your spouse, parents, siblings or other family members can be your co-applicants. Here are a few things to keep in mind before co-applying for a loan.
- The combined income of both applicants is considered. So, choose a personal loan co-applicant with a substantial monthly income and a high CIBIL score to improve your loan eligibility.
- If your co-applicant defaults on their share of the EMI payment, it can lower your future loan approval chances.
Other benefits of maintaining a high CIBIL score for personal loans
- From the lender’s perspective, a high CIBIL score translates into good repayment capacity. This means you may receive hassle-free loan approval, fast processing, and a speedy fund disbursal.
- If you have a steady income source, a high credit score, and no history of loan defaults, lenders may also extend pre-approved loan offers.
Before approaching a financial institution for personal finance, check your and your co-applicant’s CIBIL score. If you have a poor score, you can improve it by paying your credit card bills, clearing your outstanding dues, and making pending debt repayments on time. Besides that, try to limit your credit card spending to 50% of the approved limit since it depicts a good spending discipline.
Moreover, you shouldn’t apply for multiple loans simultaneously as it portrays you as ‘credit hungry’, which lowers your CIBIL score.
Additional Read: All You Need to Know About CIBIL Score
Over to you
Now that you have acquainted yourself with the nitty-gritty of co-applying for personal finance, it’s time to find a reliable financier. Turn to Tata Capital for relaxed personal loan eligibility, competitive loan terms, and extended tenures.
Apply for personal finance online today.