Who is a co-applicant in an education loan?

A co-applicant can change your education loan application significantly. With the right person, you have more chances of getting approval for an education loan from the lender. This is because a co-applicant in an education loan application guarantees the lender the repayment when you apply for an education loan option.

What is the role of a co-applicant in education loan applications? 

A co-applicant collaborates with the student to seek an education loan option. For students, having a co-applicant is essential when applying for an education loan, as the financial institution will rely on them if the primary borrower cannot repay due to unforeseen circumstances. A co-applicant is also referred to as a co-signer. 

Why is a co-applicant important for education loan applications?

Often, students who borrow an education loan do not have a lending history. A co-applicant is important for education loan applications because it provides an additional layer of financial security for the lender. 

If the primary borrower, usually the student, encounters difficulties in repaying the loan, the co-applicant shares the responsibility and can step in to ensure repayment. This reduces the lender’s risk and increases the chances of loan approval, especially for students with limited credit history or income.

Types of co-applicants

There are two kinds of co-applicants in an education loan application:

1. primary co-applicants
2. financial co-applicants

Primary co-applicant: Students have the option to include their parents as co-applicants, irrespective of their financial status, especially for education loan options from public banks. They can be retired individuals or those with irregular incomes.

Financial co-applicant: A financial co-applicant is necessary if students cannot select individuals with a stable income as their primary co-applicants. Typically, the financial co-applicants must be first cousins, immediate family members, paternal uncles or aunts, and maternal uncles or aunts. These individuals must demonstrate a consistent source of income and possess all necessary documentation to substantiate it.

Who can be an education loan co-applicant? 

The eligibility criteria for a co-applicant in education loan applications can vary with lenders. Mainly, they must have sufficient income to afford the repayment of the education loan. 

Given below are the general requirements for a co-applicant in education loan applications: 

• Be a blood relative to the student: Lenders mandate the co-applicant to be a blood relative to the student to confirm the responsibility. While many lenders (such as some public & private sector banks) need the co-applicant to be an immediate family member (parent or sibling), other lenders accept indirectly related co-applicants (cousin or parent-in-law). Also, note that the mandatory requirement for a blood relative can be negotiated in many cases, and there are lenders who provide education loans with the guarantee of an outsider co-applicant. 
• Have a good credit history and CIBIL score: Having a good credit history and CIBIL score is crucial to establishing trust with the lender.  
• Have proof of stable income: It is crucial to submit proof of the co-applicant’s stable income. The financial documents must be submitted when you apply for an education loan with a co-applicant. 

Documents required from an education loan co-applicant

How to find your education loan co-applicant? 

Here are some tips for finding your education loan co-applicant: 

• Check for the lender’s terms: Most lenders accept only family members as your education loan co-applicant. Check with your lender for eligibility requirements, and if allowed, you can consider a financially stable outsider as your co-applicant. 

• Assess the financial conditions: Look for those with sufficient income and a good credit history, as the lender prescribes. 
• Verify the documents: After identifying a potential co-applicant, verify that they have all the necessary documentation, such as proof of identity, address, income, and relationship with the borrower.

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Frequently Asked Questions

Can a friend be a co-applicant in education loan applications?

It is up to the lender to accept a friend of the applicant as the co-applicant for an education loan. Depending on your situation, you may apply for education loan options that accept your friend as the co-applicant.  

What is the difference between an education loan applicant and a co-applicant? 

An education loan applicant is the one who needs the financial support, and the co-applicant is the one who guarantees the debt. If the applicant fails to repay the education loan debt, it is the responsibility of the co-applicant to bear the repayment debt. 

How is a co-applicant different from a loan guarantor?

A guarantor commits to repaying the loan when you are unable to do so. Their responsibility arises only if you default on payments. A co-applicant shares equal responsibility for the loan or credit card. If payments are not made on time, both you and your co-applicant are responsible for repayment.

Who can be an education loan co-applicant? 

The co-applicant of an education loan application must be financially eligible and has to be relative to the borrower in general cases. However, some lenders accept co-applicants not blood-related to the borrower. 

Why is a co-applicant required for education loans? 

A co-applicant ensures a repayment guarantee that when the borrower fails to repay the debt, the lender can contact the co-applicant for repayment. 

Is it mandatory for my co-applicant to reside in India? or will it be okay if they are an NRI?

For education loan options from Indian lenders, typically, it is mandatory to have an Indian resident co-applicant.