How a Co-Borrower Can Help you to Get a Personal Loan?

Oct 26, 2020Personal Loan

According to data provided by the Reserve Bank of India, the volume of personal loan borrowings has increased sharply in the past couple of years. Personal loan borrowings have increased to a sum of Rs. 19.33 lakh crore as of June 2018 as compared to Rs. 5.89 lakh crore. Personal loans are designed to provide easy accessibility to funds and to make borrowing easier.

Enormous expenditures in the form of emergencies might occur without prior warning. Since personal loans are not backed by collateral, approval of a personal loan depends on factors like your income, outstanding loans, credit score etc. The increase in borrowings is attributed to various factors.

Applying for a loan with a co-applicant may be your saving grace when you need funds but are dealing with financially difficult situations or have a bad credit score. If a single applicant's income falls short, the income of the co-applicant is taken into consideration and makes availing a loan possible.

Who is a Co-Applicant and What is Their Role in Applying for a Loan?

A co-borrower along with the borrower is jointly responsible for making good the amount borrowed in the form of a loan. Since the co-borrower takes responsibility, the joint income and the credit scores are taken into consideration for approval of the loan.

Must Read: 5 Simple Ways to Choose the Right Personal Loan Tenure

What are the Different Purposes for Which I can Consider Opting for a Personal Loan?

Although financial institutions haven’t laid down restrictions on the purpose for which personal loans can be used, financial institutions offer different types of personal loans to cater to the borrower’s big- ticket expenditures. Some popular types of personal loans include:

Wedding Loan

Wedding loans enable borrowings in the form of a personal loan to shoulder wedding expenses for themselves or any other family members.

Home Renovation Loan

Lack of funds while renovating a home could lead to compromising on several factors that could enhance a family’s standard or improve the economic value of the property. Home improvement loans can be used to purchase material, finance home repair expenses etc.

Education Fees

Education loans can be used to finance course fees, tuition fees and other academic expenses in institutions in India or abroad.

There are also loans available for medical emergencies which are particularly useful since insurance always doesn’t cover everything. Moreover, there are also personal loans specifically designed for professionals like doctors or chartered accountants as well as self employed individuals.

Who can opt to Be a Co-Borrower on a Personal Loan?

Financial institutions permit close family members to become co-borrowers for a personal loan. Some of the permitted co-borrowers might include siblings, one’s spouse or parents. Individual lenders have their policies on who is allowed to be a co-applicant.

Factors to Take into Consideration While Choosing a Co-Applicant?

The right applicant is your key to making the borrowing process a smoother one. The following points should be taken into consideration while choosing a co-applicant:

  • The co-applicant should have a good credit score in addition to a good income to increase the chances of the loan being approved at competitive rates of interest.
  • The liability of repaying the instalments lies on both the applicants of the loan. The failure/inability on part of the co-borrower to make good the loan will require you to shoulder their part of the loan. 
  • Both the parties require to furnish the same set of documents and the documents verification and loan approval process takes longer as compared to single applicant loans.
Must Read: 5 Tips to Get Your Personal Loan Application Approved

What are the Documents Required to be Submitted While Applying for a Loan?

The documentation required for a personal loan is minimal and varies based on whether the applicant is salaried or self-employed. The main documents required to apply for a personal loan include:

  • Address proof.
  • KYC documents that include Aadhar card, voter ID and driving license.
  • Income proof case of self-employed professionals, previous 2 months’ salary slips in case of salaried professionals
  • Salaried professionals are required to furnish bank statements of the previous three months and self-employed professionals require to submit a copy of their current account statements.
  • A copy of your Income tax returns.

To avail an instant personal loan online, visit the website of the loan provider, fill in the required details and upload scanned copies of the documents required. On approval of the application, the funds are credited directly to your account.

Evaluate your requirements in detail and avoid borrowing for frivolous needs to ensure that repaying the loan does not strain your finances. Happy borrowing!

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