If you co-sign a loan, then you are signing up to take responsibility of repaying the loan availed by the main applicant. Both co-applicant and main applicant are equally responsible when it comes to paying back the loan. Hence, you must be extremely careful while co-signing a loan. You shouldn’t co-sign a loan if you are not confident of the main applicant’s repayment capabilities.
Co-signing a loan is common these days. Co-signed loans are also referred to as joint loans. Joint loans are availed when the main applicant alone does not meet the income eligibility criteria. In this case, the main applicant must add a co-applicant in order to meet the income eligibility criteria. Today, many home loans in metro cities are availed with two or more applicants. If you are adding a co-applicant to increase income eligibility, then that co-applicant must necessarily have some source of income.
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You can request friends, family members or anyone who trusts your repayment ability. A person agrees to co-sign your loan application, only if he or she trusts you. Approach only those people who know you in person. Explain the reasons behind applying for the loan. Make them understand the importance of the loan.
Family members would know you well and they are the best people to co-sign your loan, but to do that, they themselves must have finances covered. An ideal co-signer is someone with a sizeable income who can absorb your loan with little or no fuss.
If you ask someone who has bad credit history to co-sign your loan, then you mustn’t be shocked if your loan application gets rejected. Co-signer must be someone with a sound credit track record of repayments and sizeable income.
Asking your spouse to co-sign is a good option. The next best option is your parents, but for that, they should not be older than 60 years. Your friends or close relatives are great options. Request only those who trust you and have good credit history.
You shouldn’t be in a state of shock if you happen to find nobody willing to co-sign your loan. Many find this risky, as they have to take up the responsibility of repaying the loan. No one in the world is ready to put their family’s future in jeopardy by co-signing a loan.
If you find a person willing to co-sign the loan, then you have to be extremely cautious and be responsible while repaying the loan. You mustn’t let down your co-signer at any cost. Do all that you can to keep up the faith that the co-signer shows in you. Try and clear the loan at the earliest, as both you and the co-signer can heave a sigh of relief.
By adding a co-applicant, you increase chances of loans getting sanction as you meet income criteria. If you co-sign a loan, then remember that you and the main applicant are equally responsible for the repayment. It doesn’t matter if you are going to utilize the funds for your benefit, you would still be responsible for the repayment.
The main applicant’s chances of loan application getting approved increases as the overall income (main-application + co-applicant) would meet the income eligibility criteria. Following are the major financial implications of co-signing a loan:
If you have co-signed a loan and want to come out of it, then it’s not as easy as you think. Lenders would love to retain your name as they would have two accounts to attach when the main applicant defaults. Your name would be taken off from the loan only when the main applicant alone meets the requisite income criteria. Hence, you must be doubly sure when co-signing a loan.
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A friend in need is a friend indeed! This holds good when your friends co-sign your loan application. Remember that both you and the main applicant are equally responsible for repaying the loan. Your credit score is impacted the same way as that of the main applicant. If you find it risky to co-sign a loan, then you must straightaway reject the request. Don’t co-sign a loan unless you are sure of the repayment capabilities of the main applicant. You shouldn’t put your family’s future on the line by co-signing a loan. Co-signing a loan is easy, but coming out of it is not.
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