The Importance of a Co-Borrower in Personal Loan Approvals

If you are planning to apply for a personal loan soon, then consider applying for a personal loan along with a co-borrower. A co-borrower is someone who shares in the responsibility of applying for repaying a loan. If you are applying for a personal loan, then your spouse or another family member can play the role of the co-borrower. Approaching a lender as an applicant and co-applicant can boost your chances of personal loan approval. This is because personal loans are approved based on credit score. When your loan application carries a co-applicant on it, the overall credit score increases. 

Furthermore, you are more likely to be eligible for a higher loan amount at a lower interest rate. Having a co-borrower can reap benefits on even a small total such as a personal loan upto Rs 50,000. However, there are some challenges and pitfalls to be aware of when applying for a personal loan with a co-borrower. Here is a list of the advantages and things to take out for: 

Advantages of Having a Co-Borrower

Improved Credit Score: 

As mentioned, having a co-borrower can boost your credit score. If you can attain a credit score above 750, then your loan will be immediately approved. One reason for this is because of a higher income level. When you apply for a personal loan with a co-borrower, the income of the two individuals gets added. The total income is the figure that the lender is interested in.

A Better Personal Loan Deal:

Due to the increase in total income, you and your co-borrower will become eligible for a larger loan. This is because of the lower debt-to-income ratio. The debt-to-income ratio is the amount of money from your monthly income that goes toward paying your debtIn most cases, lenders do not want to provide a loan at an EMI rate that is 40% above an individual’s monthly income. However, with the increase in income, you will be able to afford a higher EMI, thereby becoming eligible for a larger loan. 

Lower Interest Rate:

Since two applicants share the responsibility of repaying the loan, the lender may decide to offer a lower interest rate. Further, having a higher income and credit score will work in your favor. 

Shared Responsibility:

Having two people share the burden of repaying the loan can work to help persuade a lender to approve a loan. Further, when there are two applicants for a personal loan, the tax benefit can be split. 

Obstacles To Watch Out ForAvailability of Co-applicant Loan:

The prospect of applying for a loan with a co-borrower is not offered by every lender. This can result in having limited options to choose from. 

Additional Documentation:

When applying for a personal loan, you need to provide proof of income, identity, and residence. When applying with a co-borrower, verification of these details is a requirement for both applicants. 

A Longer Processing Time:

If you require an urgent loan, then applying for a personal loan with a co-borrower may not be the right option. Since there are two sets of documents to process and verify, receiving a loan through this process can take longer than the standard personal loan route. 

 Dispute Between Applicants:

Signing off on a co-applicant personal loan can be a large step in terms of commitment. Please ensure that taking a personal loan with a co-borrower does not sow the seeds for disputes over payments and the like. The shared EMI is a large responsibility that should be discussed before the parties involved move forward.  

Also Read: Home Loan Processing: Essential Documents


Applying for a personal loan with a co-borrower can boost the chances of your personal loan approval for amounts as low as a personal loan upto Rs 50,000. Adding a co-borrower can increase your total income and credit score and provide a higher loan amount at a lower interest rate. Having someone to share the burden of repayment can be a double-edged sword, so ensure that this will not be an issue before you take up such a loan. If you are worried about the chances of your personal loan approval, applying for a personal loan along with a co-borrower is the way to mitigate this fear. 

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