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2 mins Read | 5 Months Ago

Does Your Co-Applicant Affect Your Personal Loan Eligibility - Know Here!

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A Personal Loan is one of the most popular ways to borrow funds as it typically comes with competitive interest rates and has zero limitations on how the borrower can use the money. You can get a Personal Loan to fund just about anything, from emergency expenses to a grand wedding

You can avail as little as Rs 50,000 or as much as Rs 50,00,000 with ICICI Bank, though your eligibility and income level dictate the amount you can borrow. That's where having a Co-applicant might help. Borrowing a large amount can seem impossible, but a Co-applicant takes the pressure off the repayment.

Who is a Co-Applicant?

A Co-applicant or a Co-borrower is someone who applies for a Personal Loan with you. They share equal responsibility of repaying the loan amount. You can add the Co-applicant to your application form. So yes, having a Co-applicant positively affects your Personal Loan Eligibility

Distinguishing between Co-Applicants and Co-Signers

While both Co-applicants and Co-signers participate in loan applications, their roles differ. The Co-applicant shares the burden of paying back, along with you. A Co-signer, on the other hand, does not have to pay back EMIs. They are only liable in case of loan defaults or if you are unable to pay the EMIs.

Personal Loan Eligibility Criteria at ICICI Bank

Eligibility criteria for Personal Loans at ICICI Bank vary for salaried and self-employed individuals. Here's a rundown:

  1. Location:

    Your residence is one of the eligibility factors that lenders pay attention to. Compared to semi-urban or rural areas, borrowers living in urban areas have a better chance of getting their Personal Loan Application approved

  2. Income:

    Your income is one of the most important factors that lenders consider. The criterion differs for salaried and self-employed professionals. You should draw a minimum salary of Rs 30,000 depending on your relationship with ICICI Bank. For self-employed individuals, the minimum income relates to the turnover or profit after Tax deduction. 

  3. Existing Loan/Debt:

    From the Bank's perspective, current debt obligations can cause disruptions in your loan repayment capacity. Therefore, existing loan/debt affects your Personal Loan Eligibility. Please check your Debt-to-Income Ratio before applying for a loan

  4. Credit History:

    Your Credit History determines your creditworthiness. Your Credit Score dictates the terms of the Personal Loan, the interest rate and tenure, among other important factors. A poor Credit Score can even lead to rejection.

Impact of Co-Applicants on Personal Loan Eligibility

Adds to your income -

Joint applications consolidate the income and favour loan eligibility. If you have a lower income, you can combine yours and that of the co-applicant, potentially increasing the level of income. A co-applicant can also help you borrow a higher loan amount

Supports your creditworthiness -

The Co-applicant’s Credit Score in no way improves yours. However, if they have a good Credit Score, it may help you meet the eligibility criteria, especially if your score is below par. The Co-applicant's score will improve your creditworthiness. However, if they have a poor score, it could affect your chances of getting the loan approved. So before applying for a Personal Loan with a Co-applicant, ask them to check their Credit Score

Improves your repayment capacity -

Co-applicants share repayment responsibility. This assures the lender that you will keep paying the EMIs on time. It also reduces the EMI burden on your monthly budget. Additionally, Tax benefits on the interest component are divided between Co-applicants

Reduces Debt-to-Income Ratio-

Joint applications may result in a lower Debt-to-Income Ratio. Having existing debt can affect your Personal Loan application and may lead to rejection. When combined, the primary applicant and the co-applicant can present a stronger financial front to the bank. With a Co-applicant, the overall Debt-to-Income Ratio can potentially reduce the burden on the primary applicant

Allows competitive interest rates-

Lenders may offer reduced interest rates for joint applications owing to increased repayment assurance and income level, better credit history and so on.

Is it a good idea to have a Co-Applicant for a Personal Loan?

It depends on several factors:

  1. How much you're planning to borrow

    If you want to borrow a small amount, you can apply for the loan alone

  2. Poor Credit History of the Co-applicant

    If the Co-applicant's Credit History is poor, you're better off applying for the loan alone

  3. The Co-applicant is equally responsible for paying the EMIs

    This can be a good thing, if you know and trust the Co-applicant. If the Co-applicant defaults in paying EMIs regularly, it will affect your Credit History. 

So, look at the pros as well as the cons when considering applying for a Personal Loan with a Co-applicant. If the cons outweigh the pros, apply for the loan alone because a Co-applicant's involvement can significantly impact Personal Loan Eligibility, with their creditworthiness and financial standing playing a pivotal role. Understanding the role and impact, both positive and negative, of a Co-applicant in loan applications is crucial when navigating the Personal Loan landscape.

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