Nowadays, personal loan apps provide excellent opportunities to borrow money without needing to provide collateral. And when applying for a personal loan then, the bank or Non-Banking Financial Company (NBFC) will consider factors like income, credit score, and employment status.
It is to determine whether an applicant who is applying can pay later the loan amount or not. Sometimes lenders often request documents like tax returns, bank statements, and other paperwork to determine the applicant’s income level.
Sometimes we don’t have all the documents that one needs to apply for loans by using a personal loan app. So in such a time to improve your chances of loan approval, you can choose to include a co-applicant in your loan application.
Co-applicant means adding another person who shares the responsibility of repaying the loans, which makes it a joint application. It will strengthen the loan application because the lender will consider the income and creditworthiness of both applicants. But there are some points that need to be considered before adding a co-applicant for a loan. What are those? We will discuss it here.
Are both applicants ready for financial responsibility?
When you add any co-applicant to your loan application, it means both parties are equally responsible for repaying the loan. Then it is extremely important to consider your co-applicant’s financial stability, income, and how much they can contribute to monthly payments. So ensure all these things before and also that the co-applicant is reliable and capable of meeting their financial obligations.
Discuss all the major factors with your co-applicants:
It’s important to carefully consider and discuss these implications before proceeding. Whether it’s a family member, spouse, or business partner, openly discuss with them about financial responsibilities, expectations, and potential risks before proceeding with the loan application. And ensure that all parties involved agree and are comfortable with the arrangement and understand the potential risks.
Is adding a co-applicant necessary with the loan amount and purpose?
First, determine if adding a co-applicant is necessary for your specific loan requirements. It’s because some lenders may require a co-applicant for larger amounts. So evaluate all the necessary things, whether the loan purpose justifies the inclusion of a co-applicant or if it can be managed solely by yourself.
What are those eligibility requirements and terms?
When you add a co-applicant to your loan application, it will definitely boost your loan application and increase your chances of approval. But it can result in more favorable loan terms like lower interest and higher loan amounts. Probably it can have opposite effects as well if your co-applicant has a poor credit history or financial standing. Which can adversely impact your eligibility and loan terms
Understand all the legal and financial responsibilities.
As a co-applicants, it’s your responsibility to understand that both parties will be legally bound to the loan. Both applicants will be responsible for repaying the loan debt. And if there any defaults are found, or any individuals missed the payments. It will affect both individuals’ credit histories. So be aware of the potential risks and obligations which are involved before adding a co-applicant.
In a nutshell:
Before making any decision for loans, it’s advisable to consult with a financial advisor to get a better understanding and guidance based on your specific situation and loan requirements. Today, there are many apps available, so you can take advantage of it.