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What Is a Co-Applicant?

A co-applicant is an additional person involved in the application of a loan besides the original applicant. They are equally considered alongside the applicant throughout the whole application process, including during the approval and underwriting. A co-applicant’s credit history can also have a positive or negative effect on the interest rate of the loan. Their circumstances may also improve the terms of the loan simply because they add an extra source of income and assets.

Do you have questions about how your loan will affect your overall financial life? Speak with a local financial advisor today.

What Is a Co-Applicant?

When someone applies for a loan, they can choose to do so with a co-applicant. This person’s credit profile, income and overall finances will have an affect on whether the loan application is accepted or not. Should the application receive approval, the co-applicant will become a co-borrower once the loan funds are paid.

While a co-applicant is typically seen as equal to the applicant of the loan, they may also be considered as a secondary applicant. Many times, they turn out to be their parent, guardian, friend or spouse.

Mortgages are common loan applications that include a co-applicant, such as a pair of spouses. Applying with a co-applicant can often increase the potential amount of the loan, as well as improving its interest rate.

Co-applicants are similar to co-signers and guarantors. However, they typically have more rights and responsibilities when it comes to the loan itself. That’s because a co-applicant is physically borrowing the funds with the applicant, making them equally responsible for primary payments. On the other hand, a co-signer or guarantor is only responsible for making secondary payments should the applicant default on the loan. They also do not have rights to the loan funds or collateral.

How to Apply for a Loan With a Co-Applicant

If you’re looking to apply for a loan with a co-applicant, the process is quite similar to applying for a loan by yourself. All you need to do is write them in as the “co-applicant” on the loan application, as well as list some of their personal information.

The lender will then review their credit score and profile, financial history, income, assets and other relevant information. In most cases, the lender uses the credit history of the more favorable applicant to determine the terms of the loan, instead of looking at both together.

Bottom Line

What Is a Co-Applicant?

Applying for a loan with a co-applicant can not only be a useful tool for getting a loan, but for receiving more favorable terms.

However, if you agree to be a co-applicant, it’s important to understand your liability and the risk you’re taking. In turn, you’ll have more responsibility for the loan than if you were just a co-signer.

Tips for Managing a Loan Balance

  • The process of taking out and paying back a loan is a necessary venture for many people, especially when a large purchase is being made. A financial advisor can help you manage this debt, while also helping you invest and save for retirement. Finding the right financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in just five minutes, so get started now.
  • One of the biggest and most expensive loans you’ll ever take out is a mortgage. There are many costs associated with mortgages, but SmartAsset’s free tools can help you figure them out. Check out our mortgage calculator and closing cost calculator today.

Photo credit: ©, © Thongsai

Sam Lipscomb, CEPF® Sam Lipscomb is a writer for SmartAsset. His work spans a wide variety of personal finance topics with expertise including retirement, investing and savings. He is particularly well versed in credit cards. Sam has been featured in The Economist and on The Points Guy. He is a Certified Educator in Personal Finance (CEPF®). Sam graduated from Kenyon College with a degree in Economics and enjoys being a go-to resource for family and friends when it comes to personal finance. Originally from Washington, DC, Sam loves all things aviation and is a Cleveland sports fan. He currently lives in New York.
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