When applying for an education loan, one of the most common questions students and parents have is, who can be co applicant for education loan? For many students, obtaining financial aid is essential since college expenses keep rising.
In 2024, India saw a significant increase in education loan applications, with financial institutions disbursing over INR 36,448 crore in educational loans. A co-applicant plays a key role in boosting loan approval chances.
This article will break down the eligibility criteria for co-applicants and guide you on maximising your education loan application.
What is Co Applicant in Education Loan?
A co-applicant is someone who, like the principal borrower, also bears some of the loan's repayment obligations. In most cases, the co-applicant is a close family member, such as a parent, sibling, or legal guardian. Still, it can also be any blood relative who meets the eligibility criteria.
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Who Can Be Co Applicant for Education Loan? Lender Preferences
A co-applicant provides additional financial security for the lender, ensuring the loan repayment is supported even if the primary borrower faces challenges. However, not everyone in your family may qualify as co-applicants, as lenders have specific eligibility criteria.
Here’s an overview of the co-applicants accepted by different lenders:
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What is the Role of Co Applicants in the Education Loan Process?
The role of a co-applicant is vital in securing loan approval. Co-applicants provide additional financial security for the lender, making the loan application more likely to be approved. They also help boost the applicant’s financial credibility and can even increase the loan amount.
Here are the key points about the co-applicant's role in education loans.
1. Increased Loan Approval Chances
Lenders feel more confident approving loans when there is a co-applicant because it reduces the financial risk.
2. Shared Responsibility
A co-applicant is equally responsible if the primary borrower cannot repay the loan. If the student cannot repay the loan due to unforeseen circumstances, the co-applicant will ensure the loan is repaid.
3. Eligibility Criteria
Different financial institutions have different criteria for co-applicants. Most lenders prefer individuals with stable incomes and good credit histories.
Types of Co-Applicants for Education Loans
The role of a co-applicant is crucial for the approval process when applying for an education loan. Co-applicants are generally divided into two groups: Primary Co-applicants and Financial Co-applicants.
1. Primary Co-Applicant
The primary co-applicant is typically a parent or legal guardian who takes on the responsibility of the loan along with the student. They don't necessarily need a stable income or a strong financial background. Even parents who are retired or pensioners can act as a primary co-applicant.
2. Financial Co-Applicant
A financial co-applicant is a person related to the student by blood, such as siblings, cousins, paternal or maternal uncles, or aunts. This co-applicant is required when the student cannot nominate a primary co-applicant with a stable income.
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Co-Applicant Eligibility Criteria for Education Loans
Many lenders require a co-applicant to secure the loan when applying for an education loan. While the basic eligibility criteria for a co-applicant remain consistent across most lenders, specific financial factors are also evaluated before approval.
Here’s a table with a breakdown of the key eligibility criteria for co-applicants for education loans.
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Documents Required for a Co-Applicant in Education Loan
To process the application smoothly, lenders require specific documents from the co-applicant, depending on whether they are salaried or self-employed.
The following table outlines the required documents for both salaried and self-employed co-applicants.
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Co-Applicants for Education Loans: Criteria for Various Study Abroad Destinations
When applying for an education loan to study abroad, the eligibility of a co-applicant can vary depending on the destination country. While most financial institutions prefer close family members like students, parents, and siblings as co-applicants, certain countries have unique requirements.
Below is an overview of co-applicant eligibility criteria for education loans based on different study-abroad locations.
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Co-Applicant vs Guarantor: Key Differences in Education Loan Applications
In the world of education loans, both co-applicants and guarantors play crucial roles, but their responsibilities and involvement differ significantly.
The table below shows the main differences between a co-applicant and a guarantor.
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How to Apply for an Education Loan with a Co-Applicant?
The education loan application process requires careful planning and submission of relevant documents, both from the borrower and the co-applicant.
Here’s a step-by-step process to apply for an education loan with a co-applicant.
1. Researching Lenders
Research the several lenders that are available, such as non-banking financial companies (NBFCs), private banks, and public banks. To determine which choice is ideal for your college loan, compare their interest rates, processing costs, payback terms, and eligibility requirements.
2. Assessing Loan Eligibility
Education loan eligibility is typically based on factors such as academic achievements, the selected course, and the credibility of the institution.
3. Selecting the Right Co-Applicant
The co-applicant, typically a parent or guardian, should have a stable income and a good credit history. Make sure the co-applicant is someone you trust, as they will be sharing the financial responsibilities of the loan.
4. Submitting the Loan Application
Once you’ve chosen the right lender and co-applicant, you can visit the lender’s branch in person or apply online. Some lenders may also assist loan experts or advisors to guide you.
5. Document Submission
Both the student and co-applicant must provide valid identification, proof of income, educational transcripts, and other required documents, all of which should be self-attested.
6. Credit Evaluation
Once the application has been received, the lender will check the applicant's credit. As part of this process, the co-applicant's income, credit score, and financial history must be examined.
Why Consider an Education Loan?
For students who want to pursue higher education but lack the funds to do so, taking out an education loan is a crucial choice. With the rising education costs, especially in fields like medicine, engineering, and management, many students are turning to loans as a practical way to fund their studies.
Here are some reasons why you should opt for an education loan.
1. Access to Quality Education
Education loans can open doors to top universities and specialised programs that might otherwise be financially out of reach.
2. Flexible Repayment Options
The flexibility of payments is one of the main benefits of an education loan. The moratorium period offered by most banks allows students to focus on their studies without the immediate concern of loan repayments after graduation.
3. Lower Interest Rates and Tax Benefits
Education loans generally have lower interest rates than personal or credit card loans. In addition, under Section 80E of the Income Tax Act, interest on education loans is eligible for tax deduction, offering further financial relief to borrowers.
4. Builds Credit History
Repaying an education loan on time helps build a positive credit history.
5. Financial Flexibility
Education loans allow students to focus on their education without the stress of managing large tuition payments upfront.
In order to secure an education loan, a co-applicant is essential because they provide financial stability and increase the likelihood of acceptance. By understanding who can be co applicant for education loans, along with the eligibility criteria, types of co-applicants, and application process, you can make informed decisions to fund your educational aspirations. Whether you're planning to study in India or abroad, choosing the right co-applicant can offer opportunities for accessing quality education and provide financial flexibility.
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