Is Taking a Joint Personal Loan Beneficial?
Jun 23,2021 CIBIL Score, Personal Loan, Digital Loan, Online Borrowing
Several borrowers opt for a joint personal loan with a co-applicant - usually a family member. As a result, the co-applicant also becomes responsible for the loan repayment. Should you opt for a joint loan?
When you get a co-applicant, your eligibility for the personal loan enhances. Before proceeding, you need to know about two important things
a. Credit Score:
The credit score of your co-applicant can affect your loan approval and amount. If your co-applicant has bad credit score, it can significantly weaken your chances of getting a loan. Thus, it is crucial to check your co-applicant's credit score before you apply for a personal loan with them.
b. Responsibility of Repayment:
Applicant and co-applicant should not forget the fact that the responsibility of paying monthly EMI's rests on both of you. If the Borrower/Applicant fails to pay the monthly EMI, then Co- borrower/ Co-applicant should be prepared to complete the payment on the partner's behalf. Defaulting on monthly EMI payments will affect credit scores of both.
Benefits of taking Joint Personal Loans
a. Higher Loan Amount
Since there is an additional applicant in a joint personal loan, lenders usually approve higher loan amounts. The collective income of both parties, along with their creditworthiness, will be critical for loan approval here. If both individuals applying for the personal loan meet the eligibility criteria, you are likely to get a higher loan amount at a competitive interest rates.
b. Ease of Repayment
The obligation of paying off the personal loan is not limited to just one individual but falls on both applicants. Therefore, individually, both loan applicants get to benefited with lower monthly EMI's and a smaller tenure. This also significantly reduces your interest obligations and supports you to get rid of debt / loan liability relatively quickly.
Joint loans are undoubtedly a great option to pass through complex financial situations. Nevertheless, it is best to keep away from taking such loans in case you are retiring soon, already having obligations, or have a poor credit situation. This is crucial as rejection can carve a dent in both yours and co-applicant's credit history.
So, if you are applying for a joint personal loan, make sure that you have your finances in order first.