Personal loans are the best solutions when you are in need of funds for personal or business use and have no collateral to secure against a loan. The loans do not require any collateral or third party guarantor. Moreover, you can get the funds at the earliest as personal loans do not involve any complex documentation. So, personal loans are the go-to loans for most financial requirements.
The quantum of loan issued depends on your income and other eligibility criteria specified by the lender. If you require a higher amount of money, there is an option of adding a co-applicant to the loan application and increasing your loan eligibility. This is called applying for a joint personal loan. Do you know what it is and how it works?
What is a joint personal loan?
A joint personal loan is when two or more than two individuals apply for a personal loan. The individuals applying for the loan are called co-applicants and the co-applicants are jointly and individually responsible for paying off the loan.
Who can be the co-applicants for the personal loan?
When applying for a personal loan with co-applicants remember that any individual cannot act as co-applicant for the loan. Your spouse, parents and brothers can only act as co-applicants. The co-applicant you choose should have a steady source of income with a good credit score to be eligible to act as a co-borrower.
How does a joint personal loan work?
When you apply for a joint personal loan your loan eligibility increases. The eligibility qualifications of the co-applicants get added to your own. Thus, the combined income increases and lenders allow a higher amount of loan. The repayment of the loan can be done by any one or all co-applicants. However, in case of a default in repayment, all co-borrowers would be jointly responsible for the default. The lender could take legal action against all the borrowers of the loan. Moreover, the credit score of each borrower would also suffer if there is a repayment default.
Benefits of joint personal loans
Joint personal loans allow various benefits due to which they are preferred by many. Such benefits include the following –
You can qualify for a higher quantum of loan. Higher availability of funds would prove useful in taking care of substantial financial obligations which you might have.
If your credit score is low, you can choose a co-applicant with a good score. The combined score would average out your bad score and you would be able to avail a loan easily which might not have been possible with your low credit score.
You can avail the benefit of lower interest rates when your eligibility qualifications, combined with the qualifications of the co-applicant present a solid financial position. Lenders tend to lower their interest rates when they are assured of repayment of their loans.
So, the next time you apply for a personal loan, understand the concept of joint personal loans. If you need substantial funds or if your credit score is a little low, add a co-applicant to your loan application and avail a loan easily.