When taking a larger loan, the bank can demand that you have a co-applicant. This happens when you do not have the income required for the loan to be approved. A co-applicant becomes an extra security for the loan and their income is also included in the loan calculation. It is most common that cohabiting or married couples seek together, or that parents of adult children become co-applicants on loans. In short, anyone who is the guarantor or co-applicant becomes as liable as the principal applicant. There are both advantages and disadvantages of being or having co-applicants for loans. Read on for more information.
- May provide better conditions for the loan
- It is possible to distribute the interest only on the main applicant
- Especially common in home loans and car loans
Benefits of co-applicants on loans
The advantages of having a co-applicant on a loan is that the bank believes that the repayment capacity is higher because there are several who share the responsibility for the payments. The fact that the repayment capacity is higher means that the banks consider it a lower risk that the money will be lost. This increases the chances of your loan being granted and it can also help you get better terms for the loan. It may be that you have to borrow a larger amount, pay less interest or other monthly expenses.
The most common is that you have a co-applicant on loans that are quite large, such as mortgage loans or car loans . It is not very common for quick loans to apply for with a co-applicant, but for such loans you are usually solely responsible for payment. If you have irregular or too little income to get a loan, you can use a co-applicant. It is also possible to make use of it if you have poor creditworthiness, for example due to payment remarks.
Disadvantages of co-applicants on loans
A credit report is always made on both parties so if both who apply for payment remarks, it can be difficult to get the loan granted. Then it may be an alternative to perhaps take each one quick loan without UC instead. Co-applicants on loans are as much liable to pay as the principal applicant. If the principal applicant does not handle the repayments, one can become alone with the debts.
The difference between being a co-applicant and a guarantor is that the guarantor must not take part of the borrowed money. When you are a co-applicant, half of the money is your own, but the guarantor receives no money but is only liable for payment if the loan is not paid. Even when you are a co-applicant on a loan, you can, as I have said, be obliged to repay the entire bank loan that has been paid out. It is therefore important that you can really trust the person you are borrowing with.
Banks that accept co-applicants on loans
Usually one can say that it is when people buy things together that they become co-applicants. As always when you take joint financial decisions with someone, it is important that you can trust each other and that you are sure that you can keep their commitments. All banks do not allow you to have co-applicants on loans. If you want to find a bank that approves of this, you can use our comparison service. There you can fill in what loan you are looking for. Fill in the amount you need, how long or short you want the repayment deadline to be, and then get a list of all the banks with the loans you can apply for.