Embarking on higher education abroad is an exhilarating journey—one that promises new horizons, lifelong memories, and the chance to unlock doors to global opportunities. Yet, as thrilling as it is, the reality of managing tuition, living expenses, travel, and academic costs can be daunting. This is where an education loan becomes your stepping stone, bridging the gap between your dreams and your finances.
However, securing an education loan is more than just filling out an application. It’s a structured process with essential steps, each guiding you closer to your dream. One key aspect is meeting the eligibility criteria for education loan, including having a co-borrower or co-applicant.
So, who is a Co-borrower?
In the context of education loans, a co-borrower (or co-applicant) is someone who shares the responsibility of repaying the loan alongside the student, the primary borrower. The role of a co-applicant in education loan is typically filled by a parent, legal guardian, or close relative who agrees to support the loan repayment if the student is unable to do so.
A co-borrower in education loan helps mitigate the lender’s risk, as students usually don’t have the income or credit history required to qualify for a large loan independently. By including a financially stable co-borrower, lenders feel more confident in the loan’s repayment.
Why Do Lenders Require a Co-borrower?
When students apply for an education loan, especially for studying abroad, they typically don’t have an established income or a minimum CIBIL score for education loan. This lack of financial history increases the risk for lenders, making it more difficult for students to qualify for loans without a co-applicant. By involving a co-borrower, lenders reduce the risk significantly.
For example, InCred education loan offers flexible terms, and some loans may be approved without a co-borrower or collateral if the student meets the required criteria. However, many students still need a co-applicant for education loan, particularly when applying for larger loan amounts or when a loan is not secured against collateral.
What is the Role of the Co-borrower?
The eligibility criteria for education loan depend on various factors, including the student’s academic qualifications, the country and university they are applying to, and their financial background. However, a co-borrower plays a critical role in meeting the education loan eligibility criteria. Lenders evaluate several aspects of the co-applicant’s financial profile to determine whether they can share the responsibility of repayment.
Here are some key factors considered:
- Income Stability: A stable and sufficient income from the co-borrower ensures the loan’s repayment capacity.
- Credit Score: The co-applicant’s CIBIL score is one of the primary factors considered. A higher CIBIL score improves the chances of approval and can lead to more favorable terms.
- Existing Liabilities: Lenders examine any existing debts of the co-borrower to ensure that they can take on the additional responsibility of repaying the education loan.
- Age and Employment Status: Most lenders require the co-borrower to be actively employed and in good health, as retirees or unemployed individuals may not be able to support the loan.
What is the impact of a Co-borrower’s on Loan Terms?
The financial stability of the co-borrower in education loan directly impacts the loan terms. If the co-applicant has a strong financial profile, the loan may come with better interest rates, higher amounts, and more flexible repayment terms. For instance, InCred Education loans offer unsecured education loans with varying collateral requirements, and a solid co-borrower can help secure more favorable loan conditions.
Additionally, some education loan providers allow the moratorium period, which gives students time to focus on their studies before beginning repayment. This flexibility is a major benefit, particularly when a reliable co-borrower is involved in the loan agreement.
What are the responsibilities of a Co-borrower?
A co-borrower is equally responsible for repaying the loan. Both the student and the co-borrower are jointly liable for the repayment, and missed payments can negatively affect both parties’ credit scores. Therefore, it’s essential that both the student and co-applicant stay on top of the repayment schedule.
If the student faces difficulties finding employment after graduation, the co-borrower may need to step in to help with loan payments until the student is financially able to take over. This is one reason why it’s important to choose a co-applicant who has the financial stability to take on this responsibility.
Can a Co-borrower Be Changed?
In some cases, the co-applicant may need to be replaced if they are unable to fulfill their obligations due to unforeseen financial difficulties. Some lenders may allow for co-borrower substitution under certain conditions. However, this process typically involves reassessing the loan terms, including a fresh evaluation of the new co-borrower’s financial profile.
Can One Get an Education Loan Without Parents as Co-Applicants?
Yes, certain lenders allow for education loans without parents as co-applicants. For example, other close relatives or even friends can serve as co-borrowers, depending on the lender’s policies.
Is a Co-borrower Mandatory for an Education Loan?
While many education loans require a co-applicant to meet the education loan eligibility criteria, it is not always mandatory. Certain loan providers offer education loans without a co-applicant or without collateral, especially for students with strong academic profiles and those seeking smaller loan amounts. NBFC’s and Banks that give education loan without co-applicant typically have specific eligibility criteria that students need to meet to qualify for these loans.
Conclusion
A co-applicant or co-borrower plays a significant role in securing an education loan, especially for students who lack sufficient income or credit history. Understanding the role of a co-applicant in education loan and the criteria for education loan can help both students and their co-borrowers navigate the loan application process with confidence.
Whether you are looking for an education loan without a co-applicant or need a co-borrower to meet the eligibility criteria, it’s crucial to understand the responsibilities that come with this partnership. Make sure both parties are fully informed and prepared before committing to the loan.