Gone are the days when students utilised their family’s savings to finance their higher education. Nowadays, they prefer financing their education independently and earning a self-made badge by taking an education loan. An education loan will help you finance your higher studies as it covers tuition fees, study material costs, cost of living, and other education-related expenses. So, if you want to know more about education loans, like benefits, the role of a co-applicant in education loans, and so on, this guide is for you.

Key Highlights

• Why should you opt for an education loan?
• What does a co-applicant mean in an education loan?
• Eligibility criteria of a co-applicant for an education loan
  • CIBIL score
  • Income Tax Returns (ITR) Document
  • Income proof
  • Income amount

Why should you opt for an education loan?

An education loan is a fantastic choice as it allows you to finance your higher education independently. Moreover, a study loan is the first debt of a student, and therefore, responsibly repaying it helps build a robust credit score. Please remember that when you apply for a student loan, lenders will require a co-applicant.

What does a co-applicant mean in an education loan?  

A co-applicant is a co-borrower that signs the education loan application and loan agreement with the primary loan applicant. Co-applicant is necessary for an education loan as the financial lender will turn to them if the primary applicant fails to repay it in case of unforeseen circumstances. Co-applicant is also known as a co-signer.

Eligibility criteria of a co-applicant for an education loan

Most financiers will need a co-applicant to process the education loan. When you apply for a student loan, you have to keep in mind the general as well as the specific criteria.

Basic eligibility criteria

• Parent, legal guardian, sibling or any blood relative can become a co-applicant for an education loan.
• A co-applicant must be the primary debtor and have an Indian bank account that allows them to sign cheques.

In addition to the basic criteria, lenders also consider other factors while evaluating the profile of a co-applicant. These factors are:

1. CIBIL score: The CIBIL score of a co-applicant is taken into consideration before sanctioning the education loan. A CIBIL score represents a person’s creditworthiness. A CIBIL or credit score ranges from 300 to 850, and it is generated after assessing factors like a person’s credit history and repayment history. The higher the score, the better the chances of getting a loan. 
2. Income Tax Returns (ITR) Document: ITR document is considered one of the most important requirements during the student loan process. This document is crucial as it allows the lender to examine the finance-related information.
3. Income Proof:

   For salaried: The lending institutions will evaluate the financial background of a co-applicant in an education loan. Therefore, if the co-applicant is salaried, submission of salary slips for the last 6-8 months as income proof is mandatory.

   For self-employed: If the co-signer runs a business, submitting the prescribed documents, such as income proof, is necessary. Here is the list of some important documents:

   • GST registration proof
   • Partnership deed or Memorandum of Association (MOA) and Articles of Association (AOA)
   • Certificate of Incorporation or Registration Certificate
   • Financial statements of the business for the last six months
4. Income Amount: The annual income of a co-applicant is also assessed by financial institutions before sanctioning the education loan. Depending on the lender, the minimum income amount limit required for the education loan, will vary.

FAQs

Q.1 Can a co-applicant of an education loan take another loan?
Ans. Yes, a co-applicant can take another loan, such as a car or home loan, if they are financially sound.  

Q.2. Can I get an education loan without a primary co-applicant?
Ans. A primary co-applicant is the person who shares the responsibility of repaying the loan in due time in case the applicant fails to do so. Therefore, it is mandatory to have a primary co-applicant to get an education loan.

At Avanse Financial Services, we prioritise the student’s employability potential over the co-applicant’s financial background. Therefore, we check academic scores, entrance exam scores, the pedigree of the university, and other relevant aspects to determine the employability score of the student. The co-borrower’s financial background is assessed as a part of the process.

So, if you are interested in pursuing your higher studies by availing student loan for education