When Do You Need A Personal Loan Co-applicant or A Guarantor?

Personal loans have become the choicest loan products as they offer a flexible way to cover all personal expenses without end-use restrictions. However, to get your loan approved by the lenders, it is vital to meet the eligibility criteria.

Lenders require a loan co-applicant or a guarantor if the borrowers do not fulfil one or two eligibility factors for loan approval.

But what factors require you to present a co-applicant or guarantor for personal loans online?

What Are Personal Loans?

When you apply for a personal loan, you can use the loan amount to cover expenses such as marriage, education, vacation, home renovation, etc. The ideal personal loan does not require pledging an asset as collateral and provides the loan amount within 24 hours of approval. However, like other types of loans, lenders charge interest on the loan amount offered.

Without the need for collateral, lenders take on significant risk as they do not have an asset to sell and recover the outstanding loan amount in case of default. To mitigate the default risk, lenders have set an eligibility criterion for a personal loan online, which borrowers must fulfil while taking a personal loan. However, in some cases, you may need a personal loan guarantor to get your loan approved.

When Do You Need A Personal Loan Co-applicant or A Guarantor

If you have applied for a personal loan, you must fulfil the set eligibility criteria to avoid pledging collateral. However, the lender may ask you to find a personal loan guarantor if you fail to meet these factors. Here are the personal loan guarantor requirements included in the eligibility criteria.

• Credit Score

The CIBIL score is a three-digit evaluation out of 900 that determines your creditworthiness before offering the loan amount. If your score is closer to 900, you are deemed more capable of repaying a loan than those with a lower credit score in India.

In India, lenders require the applicant to have a credit score of 750 and above out of 900. However, if you fulfil all the other eligibility criteria but the credit score does not exceed 750, the lender may ask you to get a co-applicant or loan guarantor.

• Monthly Income

When you apply for a personal loan, lenders review your financial condition through your monthly income to ensure you earn enough to repay the loan amount. Hence, lenders require a guarantee that the borrower must have minimum monthly earnings adequate to pay for the monthly cost of living and the loan repayment.

Generally, the minimum monthly requirement is Rs 22,000 but can go higher depending on the city of residence. However, if you do not fulfil the minimum monthly requirement criteria, the lender might ask you to apply for the loan with a co-applicant or loan guarantor.

• Credit Utilisation Ratio

It is the ratio of revolving credit you use against the available credit limit. For example, suppose you have a credit limit of Rs 50,000 and use Rs 30,000 monthly. In that case, the ratio will be 5:3.

Lenders prefer to offer the loan amount to applicants with a lower CUR, as it depicts that they don’t have to rely majorly on credit to pay for general expenses and have a stable financial situation. If your credit utilisation ratio is high, the lender might ask you to apply for the loan with a co-applicant or loan guarantor.

What Should You Look For In A Co-Applicant?

If your lender has asked you to present a co-applicant or guarantor, they must fulfil the following criteria for successful loan approval.

• The guarantor must have a good credit score above 750 out of 900 and financial history without default.
• The guarantor can be self-employed or salaried but must earn a minimum of Rs 22,000 monthly.
• The co-applicant must have all the documents required by the lender for completing KYC.
• The guarantor must have a low credit utilisation ratio without multiple existing financial obligations.

Avail Of An Ideal Personal Loan From IIFL Finance

IIFL Finance provides comprehensive and customised personal loans to fulfil your capital requirement. You can also use the personal loan calculator to determine your repayment obligations. The personal loan offers instant funds up to Rs 5 lakh with a quick disbursal process. You can apply for the loan online or offline by visiting IIFL Finance nearest branch and verifying your KYC details.

FAQs:

Q.1: What is the loan tenure for IIFL Finance personal loan?
Ans: When taking a personal loan from IIFL Finance, borrowers can choose from a loan tenure between 3 - 42 months.

Q.2: What is the disbursal time for IIFL Finance loan?
Ans: IIFL Finance disburses the loan amount within 24 hours into the borrower's bank account.