Quick and accessible funding is essential for students pursuing higher education. While an education loan provides financial support, securing one can be challenging, especially if the primary applicant lacks a strong credit history or sufficient income. This is where a co-applicant plays a key role in improving loan eligibility.
With a co-applicant, students can improve their chances of loan approval, get better interest rates, and access higher loan amounts. This article explores a co-applicant’s role in an education loan, its impact on eligibility, and key borrower considerations.
What is a Co-applicant in an Education Loan?
A co-applicant in aneducation loan is someone who shares financial responsibility for repaying the loan alongside the primary borrower. Co-applicants, also known as co-borrowers, strengthen the loan application by offering an extra source of income and financial stability.
What is the Difference Between a Co-applicant and a Guarantor?
While both co-applicants and guarantors provide financial backing, they have distinct roles:
Aspect
Co-applicant
Guarantor
Loan liability
Shares equal responsibility for repayment
Liable only if borrower defaults
Impact on credit score
Affects both the borrower’s and co-applicant’s credit score
Affects credit score only if repayment is missed
Income consideration
Lender assesses co-applicant’s income for eligibility
Guarantor’s income is not considered
Who Can be a Co-applicant?
Typically, lenders allow the following individuals as co-applicants:
Parents or legal guardians (most common).
Spouse or siblings (in some cases).
Other close family members as per lender guidelines.
Note: Friends are generally not allowed as co-applicants.
How Does a Co-applicant Enhance Loan Eligibility?
Applying with a co-borrower for an education loan improves loan approval chances. Here’s how:
Better creditworthiness: Lenders assess both the student and co-applicant’s financial profiles. A co-applicant with a stable income and a strong credit score increases approval chances.
Higher loan amounts: With a financially strong co-applicant, students may qualify for a higher loan amount, covering tuition fees, accommodation, and other expenses.
Lower interest rates: A well-qualified co-applicant can secure lower loan interest rates, reducing repayment costs
Faster loan approval: A strong co-applicant in education loans leads to quicker loan processing and approval.
What are the Eligibility Criteria for a Co-applicant?
To qualify as a co-applicant, individuals must meet certain financial requirements:
Stable income: Lenders verify that the co-applicant has a consistent income to ensure smooth loan repayment. A lack of steady earnings may affect approval chances.
Good credit score: A high credit score indicates financial credibility and enhances the chances of securing a loan.
Employment status: Co-applicants should be salaried or self-employed with verifiable income sources. Lenders prefer individuals with a stable job or business for financial security.
Income Tax Returns (ITR): Lenders require recent ITR documents for income verification.
Existing liabilities: Ongoing loans or debts are checked to determine repayment capacity and overall financial stability.
What Documents Are Required For an Education Loan by The Co-applicant?
Lenders require different documents based on whether the co-applicant is salaried or self-employed. Here’s a breakdown:
Document type
Salaried co-applicant
Self-employed co-applicant
Recent salary slips
Last three months
Not applicable
Business address proof
Not required
GST certificate, MSME certificate, or utility bill
Income Tax Returns (ITR)
Form 16 or IT returns for the last two years
IT returns for the last two years (max 6-month gap)
TDS certificate (Form 16A)
Required, along with balance sheet, and profit and loss statement
Required, along with balance sheet, and profit and loss statement
Bank statements
Last six months
Last six months
Statement of assets and liabilities
Mandatory
Mandatory
Professional qualification certificate
Required for professionals like C.A., doctors
Required for professionals like C.A., doctors
These documents help lenders evaluate the financial standing of the co-applicant and ensure they meet the loan eligibility requirements.
How to Apply For an Education Loan With a Co-applicant?
Fill the loan application form online with your details and those of your co-applicant. Provide basic information about your course, institution, and loan amount required.
2. Document submission
Submit the required documents of both the student and the co-applicant. The same can include proof of income, bank statements, ID proofs, and the letter of admission issued by the educational institution.
3. Verification
The financial position of the applicant and the co-applicant is scrutinised by the lender. The credit score, stability of income, and ability to repay is evaluated to sanction the loan.
4. Approval and sanction
After being verified, the loan is approved. A sanction letter with the amount of the loan, interest rate, tenure, and repayment schedule is given.
5. Disbursal
After agreeing to the terms of the loan, the amount is disbursed directly to the school in accordance with the fee structure.
Who Should Consider Applying With a Co-applicant?
Here are some individuals who may benefit from applying with a co-applicant:
Students without a credit history: Most students do not have a financial track record, so a co-applicant strengthens their loan application.
Borrowers needing higher loan amounts: A stable co-applicant can secure a larger loan for tuition and living expenses.
Applicants with low credit scores: A co-applicant with a good credit score increases approval chances if the primary borrower has a weak credit profile.
Conclusion
A co-applicant in an education loan plays a vital role in improving loan eligibility, securing better terms, and ensuring successful repayment. By adding a financially stable co-borrower, students can easily access the funds they need for higher education.
Can a friend be a co-applicant for an education loan?
No, a friend cannot be a co-applicant for an education loan. Lenders usually require close family members, such as parents, legal guardians, spouses, or siblings, to act as co-applicants.
Who can be a co-applicant for an education loan?
Depending on lender guidelines, a co-applicant in an education loan can be a parent, legal guardian, or spouse.
Does a co-applicant need a good credit score?
Yes, a strong credit score enhances loan approval prospects and helps secure lower interest rates. It also makes it easier to qualify for a higher loan amount.
03 April 2025
5 mins read
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