A personal loan is an amount provided by the banks or NBFC’s (Non-Banking Financial Companies) to help you meet your urgent personal needs. These can be accessed easily at a feasible personal loan interest rate, and you can even enjoy a flexible repayment schedule. The banks and NBFC’s (Non-Banking Financial Companies) which have to be met before you apply for a personal loan. Some considerations are:
You must be of minimum 21 years of age,
You must have a stable source of income, and
You must have a good credit score (preferably, 750 and above).
The conditions specified above may differ for banks and NBFC’s (Non-Banking Financial Companies). These are the basic prerequisites of the lender you need to comply with. There may be instances where your credit score is below the specified limit or your income is not enough for you to get a personal loan. If your credit score is low then the lender will provide you with the loan, but at a high personal loan interest rate. If your income is not enough then you have fewer chances of getting a personal loan. SBI personal loan policy demands the credit score to be 650 and above. Usually, a personal loan is unsecured but there is one other variant of personal loan, also known as secured personal loan, where you can provide collateral to the lender and avail the personal loan. When you do not have security to give then you can involve a co-applicant/co-signer.
A co-signer is a person who helps you to get the terms of the loan turn in your favor. A co-applicant/ co-signer can be anyone from your family. It can be your spouse or your parents. Always keep in mind that a co-signer has to have a good credit score if you want the loan to be granted to you. A co-signer’s income will be clubbed with yours which will ultimately increase your income bracket and satisfy the requirement of the lender. This way the personal loan interest rate charged will also be less.
Being a co-applicant/ co-signer comes with a grave responsibility. It has less reward and there is a risk element that tags along with it. If you are a co-signer then you have cover-up for the defaults made by the borrower. The co-signer will have to pay the remaining personal loan amount along with the personal loan interest. You become responsible for the delays and you have to bear the costs as well. Non-payment of these dues will reflect poorly on your credit score and impair your ability to get a loan in the future. If there is a legal action taken by the lender then it will affect you as well.
Helping out a friend or your loved ones is not a crime but it is important for the co-signer/co-applicant to carefully think and then consider this decision. One wrong step can have a long-lasting impact on the co-signer’s finances.
Comments