How Does Co-Applicant CIBIL Score Impact Personal Loan Application?

Personal loans are on the rise considering the flexibility and benefits it provides. With the surge in cost of living and inflation, many people need personal loans to meet sudden financial difficulties, such as a medical emergency or wedding, higher education, business, or even travel. However, even though personal loans are easy to avail of, many people still face a hard time getting the personal loans sanctioned, particularly because of failure to meet one or two criteria.

Therefore, they resort to introducing a co-applicant to strengthen the profile and increase the chances of approval. However, have you ever wondered how co-applicants impact your loan application? Here is a guide as to understanding the impact of co-applicant and their CIBIL score on your loan application. However, let’s first understand the meaning of the CIBIL Score.

What is CIBIL Score?

CIBIL score is the credit history of the borrower encompassed in 3 digits ranging from 300 to 900. It depicts the creditworthiness of the borrowers and shows past credit performance. Banks and other lenders use the CIBIL score in order to assess the repayment capabilities of the borrower.

When shall a co-applicant be introduced?

Usually, the loan application is processed based on the profile of the applicant. However, the following scenarios may warrant introducing a co-applicant in your personal loan application:

  • To meet income eligibility criteria: If the applicant misses the income eligibility criteria, then introducing a co-applicant helps in fulfilling that criterion. Banks and financial institutions consider the income of the co-applicant as well while processing the application.
  • To meet CIBIL score eligibility criteria: If the applicant has a low CIBIL score, then he may have a hard time getting the loan application approved. Therefore, introducing the co-applicant assures the bank in terms of repayment capabilities as the banks can proceed against two persons in case of failure to repay.
  • To reduce costs: Even though the applicant satisfies the eligibility criteria, banks and financial institutions charge a higher interest rate and other costs when they feel that the risk factor is high. Hence, applicants may reduce the risk of banks by introducing co-applicants. Co-applicants ensure that two persons are ready to repay the borrowed amount, thus leading to reduced interest rates and other changes.

Impact of Co-applicant’s CIBIL Score

Following is the impact of co-applicant CIBIL score on your loan application:

  • A higher co-applicant CIBIL score increases the chances of getting the loan sanctioned.
  • Skipping on EMI can reduce the CIBIL score of the applicant as well as co-applicant.
  • A higher co-applicant CIBIL score means better repayment capabilities. This leads to reduced costs as the debt-to-income ratio reduces, thereby according faster approval.

Co-applicant CIBIL score is an addition to and not a substitute for your CIBIL score. Therefore, strive to maintain a good CIBIL score as it plays a crucial role in your loan application.

Bottom Line

Personal loans have easy to fulfill eligibility criteria, and co-applicants can easily make up for the shortfalls. With affordable personal loan interest rates, it has become a preferred choice for borrowers. You can preplan the repayment to avoid skipping EMIs by using financial tools like the personal loan EMI calculator. It calculates the exact amount of EMI after you enter the loan amount, tenure, and personal loan interest rates. Therefore, if you have sudden financial exigencies to meet or want to fulfill any of your dreams, then apply for the personal loans now.