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Personal Loan Co-Applicant: Need and Impact on Eligibility
Posted on Thursday, August 14th, 2025 | By IndusInd Bank
Taking a personal loan can be a quick and convenient way to meet urgent financial needs, be it for medical expenses, education, home renovation, or even debt consolidation. However, not everyone meets the eligibility criteria set by banks and NBFCs. In such cases, having a co-applicant can significantly improve your chances of approval.
Let’s break down what a personal loan co-applicant is, when you might need one, how they influence eligibility, and what factors to consider before choosing them.
What is Co-Applicant?
A co-applicant is a second applicant who applies for the loan along with the primary borrower. Both applicants share equal responsibility for repaying the loan. This arrangement is common in secured loans like home loans, but it is also available for certain unsecured loans such as personal loans.
The co-applicant’s financial and credit profile is considered along with the primary applicant’s during the loan assessment process. This combined evaluation helps lenders make a more accurate risk assessment.
When Does a Need of Personal Loan Co-Applicant Arise?
The need for a co-applicant typically arises in situations like:
- Low Credit Score – If the primary applicant’s credit score is below the lender’s threshold, adding a co-applicant with a strong score can improve approval chances.
- Low Income – Lenders require a minimum monthly income to approve loans. A co-applicant’s income can help meet this criterion.
- High Loan Amount Requirement – For larger loan amounts, having a co-applicant reassures lenders about repayment capacity.
- High FOIR (Fixed Obligations to Income Ratio) – If your debt-to-income ratio is high, a co-applicant can help reduce the burden in the lender’s assessment.
- Self-Employed Applicants – Self-employed individuals with irregular income streams may need a salaried co-applicant to strengthen the application.
Also Read: Essential Criteria for Qualifying for a Personal Loan
How Does Personal Loan Co-Applicant Impact Your Personal Loan Eligibility?
A co-applicant can positively affect your loan eligibility in several ways:
- Improved Creditworthiness: The lender considers both applicants’ credit scores. A higher combined score increases trust.
- Higher Loan Sanction: The combined income allows for a higher approved loan amount.
- Better Interest Rates: Stronger combined profiles can help you negotiate lower interest rates.
- Reduced Risk for Lender: Shared repayment responsibility lowers the perceived lending risk.
- Approval for Borderline Profiles: If you’re just below eligibility requirements, a co-applicant can tip the scales in your favor.
Things to Look for in a Personal Loan Co-Applicant
Before adding a co-applicant, ensure they meet these criteria:
- Good Credit Score (750+) – Improves your loan approval chances.
- Stable Income – Preferably a salaried individual with consistent earnings.
- Low Existing Debt – High debts may negatively impact combined eligibility.
- Trust Factor – Since both parties are equally liable, choose someone reliable.
- Relationship Requirement – Many lenders allow only immediate family members (spouse, parents, or siblings) as co-applicants for personal loans.
Summing Up
A personal loan co-applicant can be a game-changer for borrowers who fall short of lender criteria. By combining income and credit profiles, you can secure better loan terms, higher amounts, and even lower interest rates. However, choose your co-applicant wisely to ensure smooth repayment and maintain a healthy relationship.
