A common example of this is a married couple applying for a mortgage. By applying for the loan together, both spouses’ incomes and credit are used as criteria for the loan.
Alternate name: Co-borrower
How Having a Co-Applicant Works
Married couples are the most common example of co-applicants. However, a co-applicant also can be a parent, friend, or business partner. The process of applying for a loan with a co-applicant is similar to applying on your own. After filling out your personal information for the loan application, the other individual will do the same with their own information. Both of you will sign the application. When the lender reviews your application, they will run credit checks on both individuals. They’ll also consider each party’s financial history, income, and any other relevant information.
Benefits of a Co-Applicant
Higher odds of approval: When you apply with a co-applicant, their income, assets, and credit history are considered alongside yours. This may increase your odds of getting approved for the loan.Lower rates: If the co-applicant has excellent credit, you may qualify for lower rates and better loan terms.Higher loan amount: Applying with a co-applicant could help you qualify for a higher loan amount. That’s because two borrowers can afford more than one person can on their own.
Co-Applicant vs. Co-Signer
A co-applicant is often confused with a co-signer, but they aren’t the same thing. A co-applicant is applying for the loan alongside the borrower, and both parties share in the responsibility and the benefits of receiving the loan. In comparison, a co-signer applies for a loan with a borrower to increase their chances of getting approved. Typically, the main borrower either has poor credit, a limited credit history, or insufficient income. They apply with a creditworthy co-signer to approve their odds of approval and receive better rates and terms. A co-signer agrees to take responsibility for the loan only if the borrower is unable to meet their monthly payments. This is also less risky for the lender because there’s another person on the hook for the loan if the borrower defaults.
