Updated on October 4, 2023
Loans like home loans and car loans have the option for co-application where more than one borrower can apply for a loan. The term co-borrower and the benefits of the same are mentioned here.
Meaning of Co-borrower
A co-borrower, often referred to simply as a co-applicant, is an individual who applies for a loan along with the primary borrower. Both the primary borrower and the co-borrower share equal responsibility for repaying the loan and both their incomes and credit histories are considered by the lender during the loan application and approval process.
What are the eligibility criteria for co-borrowers?
Lenders typically set specific eligibility criteria for co-borrowers. These criteria include having a close familial or spousal relationship with the primary borrower, such as spouses, parents, children, or siblings. Co-borrowers are also required to meet the lender’s income and credit score prerequisites, with their financial stability playing a vital role in loan approval. Additionally, co-borrowers must be of legal age, typically 18 years or older, to enter into a financial contract.
Understanding co-borrowers in detail
Co-borrowers play a significant role in various loan types like home loans, personal loans, and education loans, enhancing the chances of loan approval and potentially securing more favourable terms for the primary borrower. Lenders assess the combined income and creditworthiness of both primary borrowers and co-borrowers to determine loan terms. It’s important to note that co-borrowers share equal responsibility for loan repayment, and including one can be beneficial for the primary borrower’s eligibility and interest rate. While co-borrowers may not directly benefit from the loan proceeds, their credit history can benefit, potentially aiding their future loan applications.