Introduction
Joining forces with a co-applicant for a joint personal loan increases your chances to qualify and your amount of borrowing, possibly leading to more favourable terms and less risk. It becomes a practical solution to finance large purchases or live a comfortable life. However, a personal loan co-applicant might be useful to fill up the difference between what you need and what you can individually access for home renovation purposes or debt consolidation.
However, if you are considering applying for a joint personal loan, it is important to consider the eligibility criteria and some of its factors. Let’s delve deeper to understand how a joint personal loan in India works.
What is a Joint Personal Loan?
A joint personal loan is a financial transaction or agreement that involves obtaining a loan with a co-applicant – a person who jointly owns the loan amount as well as shares the responsibility of repayment with the primary borrower. This type of loan is beneficial if the income and credit score of the primary applicant do not meet the eligibility requirements to secure a loan independently. A joint account personal loan can often help you secure more favourable terms, a higher loan amount and lower interest rates.
Example of Joint Personal Loan
Applying for a joint loan is a more practical financial solution when you would not be eligible on your own. This type of loan is popularly used by couples or family members wherein their combined credit score and income can help them qualify for a large loan amount as compared to applying independently. The amount that you borrow can be used to make large purchases, home improvements, or to consolidate debt. However, the primary applicant and the co-applicant are equally responsible for repaying the loan.
For example, you and your spouse apply for a 50 lakh instant personal loan using the latter as your co-applicant. The financial institution grants you (primary borrower) 30 lakh based on your profile and 20 lakh based on the co-borrower’s. So the ratio is 2:1. If the EMI amount is INR 50,000, then you would contribute INR 30,000 and your spouse (co-applicant) would bear the remaining amount.
In case you or your spouse fails to pay, the other person will be liable for the entire principal amount and interest rates.
Features of Joint Personal Loan
Let’s understand the key features of a joint personal loan:
1. Higher Loan Amount
When you apply for a joint personal loan, the lender factors in both the primary borrower and the co-applicant's income as well as credit score. This may provide you with more loan money than if you have a stand-alone application. The bigger amount of loan can be used to finance larger expenses like a wedding, medical emergencies or home renovations.
2. Shared Repayment Responsibility
The main feature of joint debt is that you and the co-applicant/s are equally on the hook for paying back the personal loan. It minimises the burden of repaying the loan on a single borrower.
3. Lower Interest Rates
Lenders consider each individual’s commitment and creditworthiness in a joint personal loan, potentially resulting in lower interest rates as compared to borrowing individually. Joint loans are often perceived as less risky so you have a better chance to negotiate for favourable interest rates.
4. Flexible Loan Tenure
The repayment tenure is generally longer for a personal loan joint application so that they can manage their EMIs comfortably over a longer tenure.
Eligibility Criteria for Joint Personal Loan
Regardless of the lender, there are the most common joint personal loan eligibility requirements you must satisfy:
1. Minimum Age Requirement: Both the primary applicant and the co-borrower must be 21 to 60 years of age.
2. Citizenship: Candidates applying should be an Indian citizen and be a working employee of a public limited /private limited/ MNC.
3. Income: In order to apply for a joint personal loan, the applicants need to have a monthly salary of INR 25,000.
4. Academic & Work Experience: The candidates must have graduated from a registered university and should have at least one year’s work experience.
5. Credit Score: A credit score of over 750 is required for both applicants.
How to Apply for a Joint Personal Loan?
The personal loan joint application process is pretty straightforward. Discussed here are some important steps to apply for a joint personal loan.
1. Fill out the Application Form: The applicants must duly fill out the application form as provided by the lender. If you are seeking a joint personal loan online, simply navigate to the lender’s website and hit, “Apply Now.” You’ll be taken through the online process.
2. Submit Your Documents: After filling out the application, you will have to submit a handful of important documents. These include PAN card , Aadhar Card , Bank statement for the last six months , Proof of income or salary slips for the last three months.
3. Lender Verification: The financial institution will evaluate the application form and verify all your documents to determine accuracy and your loan eligibility. They will also check the credit scores of both borrowers.
4. Loan Approval and Disbursement: If the lender is assured of your loan eligibility and financial stability, they will approve it and credit the amount to your bank account.
How does a Joint Personal Loan work?
How many times have you applied for a personal loan but got rejected due to poor credit score or not having enough monthly income to repay the loan? Are you paying higher interest rates for a loan because you did meet the eligibility as required by the lender? One of the most effective methods to enhance your eligibility and qualify for a loan is to apply for a joint personal loan with a co-borrower.
When you add a co-applicant, a lender considers the combined creditworthiness and income against the loan liability, to lend you a bigger amount and at better terms. They will have equal ownership over the funds as well as share the burden of repayment.
Advantages of Joint Personal Loan Work
There are several benefits of having a co-borrower to secure a personal loan. The key advantages are highlighted herewith:
1. Access to Higher Loan Amount
The combined creditworthiness and income of the primary borrower and co-applicant/s may help you qualify for a higher loan amount compared to applying independently.
2. Ease of Repayment
A joint personal loan usually has a longer tenure that goes up to 5 years. And now, it's a payback that you have to bear along with your co-applicant (less pressure on one person).
3. Tax Benefits
Depending on the purpose of the loan, a joint loan account may attract tax relief for the applicants. You may also receive additional tax benefits if the co-borrower is your spouse.
4. Lower Interest Rates
Wondering how you can fulfil the personal loan eligibility conditions and get low interest rates as well? By employing a co-applicant, you shift down as a low-risk borrower, which makes you eligible to negotiate on loan terms and interest rates.
5. Faster Loan Disbursements
As lenders perceive joint account personal loans as less risky, the approval process will be faster and you can secure the money quicker, without stress.
Things to Consider When Opting for a Joint Personal Loan
The advantages of obtaining a joint personal loan are far-fetched. However, However, you need to consider some factors:
1. EMI Amount: The applicants need to really consider the amount that they are willing to pay off each month.
2. Impact on Credit Scores: The failure to pay by either the primary borrower or the co-applicant would affect the credit scores of both.
3. Repayment Responsibility: If the repayments are not shared by the co-borrower, the main applicant is responsible for settling the entire loan amount (with interest).
4. Documentation Time: Collecting the requisite documents, as per the joint personal loan eligibility criteria, may be time-consuming.
Get a clear idea of the qualifying conditions by reviewing the personal loan eligibility criteria on lendingplate
How to Calculate EMI for a Joint Personal Loan?
Before you apply for a personal loan, it’s important to find out how much your monthly repayments will be. This is expressed by the formula:
EMI = [P x R x (1 + R)N] / [(1 + R)N – 1]
Here,
P = Principal Loan Amount
R = Interest Rate
N = Loan Tenure
Joint Personal Loan Calculator
Who can become a Co-Applicant?
A co-applicant is anyone who applies for a joint loan with a primary borrower. They can be your family, friends or business partners. The co-applicant will be the co-owner of the loan with the primary applicant and is also liable to make the loan repayments.
What is the Impact of a Co-Applicant on your Personal Loan Eligibility?
Applying with a co-applicant can also affect your personal loan eligibility - for better or for worse. If the co-borrower has a good income or credit score, it can help compensate for where you may be lacking to meet eligibility. That can provide you with a larger loan sum and lower interest rates. Alternatively, if the co-applicant has a poor credit score or they have a low income, it can reduce your chances of a personal loan approval.
If they fail to pay your loan, it will ding the credit scores of both of you, as well.
Factors that Affect Joint Personal Loan Eligibility
While fulfilling the basic requirements is crucial, several other factors may affect your eligibility for a joint personal loan:
1. Loan Amount and Repayment Tenure: High loan amounts and tenures may necessitate that the borrowers should have sufficient income and high credit scores.
2. Relationship with the Co-Applicant: The relationship, e.g. spouse and other family members, is considered more acceptable.
3. Income Disparity: If there is a vast difference in the income between the main borrower and the co-applicant, it may impact your personal loan eligibility.
How to Improve Eligibility for Joint Personal Loan?
Not qualifying for a joint personal loan? Here are a few ways you can improve your eligibility:
1. Work on Your Cibil Score
Your cibil score is the single most important factor which impacts your personal loan eligibility. A good way to do this is by making sure you pay your bills promptly, have low credit utilisation, and report any credit report inaccuracies that are working to your disadvantage.
2. Show Multiple Income Sources
Getting a part-time job or renting out a property can be good ways to increase your income and improve your loan eligibility.
Frequently Asked Questions (FAQs)
Q.1. How does a joint personal loan function?
In the case of a joint personal loan, the lender evaluates both the main applicant and co-borrower's eligibility and sanctions the loan based on their joint income and individual repayment capacity. Your co-applicant is also liable for the same repayment.
Q.2. How many people can be co-applicants on a joint loan?
The maximum number of co-applicants you can add on a joint loan is 2 – 4.
Q.3. How do I apply for a joint personal loan?
You must be a valid Indian citizen with age between 21-60 years.
The applicants must have a 750+ credit score.
Their income should be at least INR 25,000 per month.
The borrowers must be graduates with a minimum of 1 year of work experience.
Q.4. Is it better to have a joint personal loan?
Getting a personal loan with a co-applicant can help you get more money and better terms. You can even negotiate for longer loan tenure and lower interest rates. However, if one borrower defaults, the repayment responsibility lies entirely with the other party. It also affects the credit score negatively.
Q.5. Can you put two people on a personal loan?
Yes, two people can jointly apply for a personal loan. The concept of co-borrowing works here wherein the combined income and eligibility of both applicants are factored in. Additionally, they both share responsibility for repayment.
