Things You Should Consider while taking a Personal Loan with a Co-borrower

People sometimes face a situation where they need quick money. In such circumstances, a personal loan is a great option. A personal loan is a loan that you can borrow from a bank without security. There is a criterion for people who can apply for a personal loan. The eligibility to apply for a personal loan is as follows:

Personal loan eligibility

  • The candidate must be between 21 and 60 years.
  • The candidate must have an income of Rs.25,000 or above.
  • The candidate must have a CIBIL score of 750 or above.
  • The candidate must be a citizen of this country.

People who do not fulfil even one of these requirements cannot take a personal loan. In this situation, the co-borrower comes into the picture. As a co-borrower, you and the person seeking the loan, both take the loan, allowing the borrower to get a high amount on better interest rates. But how does this exactly work?

Your credit scores play a great role in the procedure, along with a few more factors. The borrower gets the loan based on your credit history, and by co-signing, you enable them to get approved and get a higher amount as well.

It sounds good for a person who wants to help their loved ones, but there are a few things you must consider before doing this. Co-signing can be a risky thing to do because of its factors.

Factors to consider before cosigning

There are a few factors that you must keep in mind before co-signing, these are-

  • Credit score
  • Debt and income ratio
  • EMI
  • Credit score
    When a person decides to be a co-signer, they have to agree to the loan terms. The primary borrower must make all the repayments on time, or else the burden falls upon the co-signer. All the details of ongoing loans and repayment records add up in the credit history and affect the credit scores of both people. Co-signing will harm your credit score when a friend or your family member fails to repay. On the other hand, your credit rating will go up if all the repayments are made on time.
  • Debt and income ratio
    It is the ratio of monthly debt to income. Both the applicants are held equally accountable for the loan. Thus, the loan’s repayments are added to your payments and increased DTI ratio. DTI ratio will increase when your income decreases. It can negatively impact your ability to borrow credit. If you are financially stable and can repay the loan amount, there is no harm in co-signing.
  • EMI
    Co-signing requires you to repay the loan if the borrower fails to do so. A missed or delayed payment will hurt your credit report and lower your credit score. To avoid this situation, you need to communicate clearly with the primary borrower. You must review your and borrower’s budget to avoid or prepare for any complications. It is important as co-signing affects both parties’ DTI and credit scores. In this case, a Personal Loan EMI Calculator can come in handy. You can find them online on various sites.


Co-signing is not always a poor decision, but you must remember all the risks attached to it. Before you decide to co-sign, you must read the agreement carefully and evaluate the consequences. You must also assess your payment capacity. It benefits the primary borrower a lot by providing better Personal Loan Interest Rates. If you do not want to co-sign someone’s loan, tell them. You can also lend money to help with the down payment instead.

Author Bio: Hi, I’m Pooja and I’m a passionate Blogger, Freelancer, Writer, and Digital Marketer. and I love tech stuff and games. Gembells, Hotmaillog, Indianlatestnews.