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How Does the Co-Applicant’s CIBIL Score Impact your Personal Loan Application?

Published on Dec 2, 2021Updated on May 21, 2024

How Does the Co-Applicant’s CIBIL Score Impact your Personal Loan Application?

The need for financial assistance can arise at any time. Institutionalised lenders typically offer financial aid in the form of loans. There are different types of loans – home loans, auto loans, personal loans, etc. Even Credit Cards are one form of a loan.

Borrowers who are seeking loans from credit institutions and banks have to fulfil the eligibility criteria laid out by these lenders. If you have ever applied for a loan, you may be aware of the numerous criteria used to sanction loans.

Loan seekers who lack a credit history or whose income is inadequate are likely to have their loan application rejected. In such a situation, one way to get your loan application approved is to onboard a co-applicant.

Loan applications where co-applicants sign on are also known as joint finance.

Who Can Be a Co-Applicant?

If you are looking to avail a personal loan with a co-applicant, the latter is required to fulfil certain criteria. For example, some lenders allow siblings to become co-applicants while others do not.

Most lenders consider spouses to be the best co-applicant. Since the incomes of both your spouse and you are considered, you can apply for a joint loan account together.

The repayment tenure is decided based on the age of the oldest applicant. Both husband and wife can avail tax benefits that the loan allows.

Banks and financial institutions also allow family members to become co-applicants. This includes the mother, father, or siblings. Lenders only allow blood relatives to be co-applicants.

The co-applicant must be a working member of the family who has a stable income and satisfies the other eligibility criteria for the loan such as credit score.

Advantages of Having a Co-Applicant

  • Better Loan Eligibility
    When deciding the eligibility of the loan seeker, the lender considers the joint income of the applicant and the co-applicant. Having a co-applicant ensures that there is a higher chance of becoming eligible for a personal loan.
    If you are looking to avail a loan from SMFG India Credit, visit our website today and use our personal loan eligibility calculator to see if you need a co-applicant to apply.
  • Low Debt to Income Ratio
    High debt to income (DTI) ratio is one of the primary reasons why loan applications get rejected. DTI is the ratio of the total EMI to the total monthly income. Since the lender also considers the income of the co-applicant, the DTI ratio is lowered, increasing the chances of approval.
  • Low CIBIL score
    If you have a low CIBIL score, the chances of rejection of your loan application are high. Fortunately, if your co-applicant’s CIBIL score is high, it is more likely that your loan application will be approved.
  • Better Interest Rates
    A co-applicant can boost your chances of getting preferential interest rates. When deciding the interest rate, lenders take into account the loan amount, total income of the applicants, and the borrower’s CIBIL score.

If your co-applicant has an excellent CIBIL score, it will help you to negotiate better interest rates for your loan.

Must Read: How a Co-borrower Can Help You to Get a Personal Loan?

Responsibilities of a Co-Applicant

If the borrower defaults on the repayment of the loan or is unable to pay due to unforeseen and unavoidable circumstances, the co-applicant is responsible for the complete repayment of the loan.

To ensure that the co-applicant is also creditworthy, lenders also check the CIBIL score and report of the co-applicant. The loan application may be adversely affected if the minimum CIBIL score for personal loan as well as other eligibility criteria is not fulfilled.

A joint loan affects the CIBIL score and credit history of both borrowers. It also reflects on the CIBIL report of both applicants. If the borrower is late in making the payments or defaults, this behaviour will adversely affect the credit report of the co-applicant as well.

Furthermore, creditors can approach either party for collections and payments. Hence, the onus falls on both the borrowers to ensure that the EMIs are always paid on time.

Things to Remember When Using a Co-Applicant

If you are jointly applying for a loan with a co-applicant, you must keep the following in mind –

When processing a joint loan application, lenders ask for the latest IT returns, employment certificates, bank statements, and Know Your Customer (KYC) documents of both applicants. Make sure both of you have the updated documents when applying for the loan.

Joint personal loan option is not offered by all lenders. Check your options with the lender before applying. 

The application process takes a bit longer when you collaborate with a co-applicant for a personal loan

When Should you Not Use a Co-Applicant?

If your co-applicant has a debt to income ratio that is similar to or higher than yours, it is not advisable to onboard the co-applicant on your loan application. A co-applicant with a poor DTI ratio can lower the chances of your loan approval getting approved, even if the primary borrower is eligible.

At SMFG India Credit, we offer a wide range of products and services to meet your financial needs. If you are looking for a personal loan, visit our website today and use our personal loan EMI calculator to customise the terms and conditions to suit your unique needs.

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

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