What Is a Co-Applicant?

Co-Applicants Explained in Less Than 4 Minutes

Smiling couple shake hands with banker holding papers
•••

Ariel Skelley / Getty Images

A co-applicant is an additional person involved in the loan application process. Both applicant and co-applicant apply and sign for the loan, and a loan underwriter considers their credit history and income along with yours when determining if you qualify.

A co-applicant shares the responsibility for repaying the loan with you equally, and both borrowers benefit from receiving the loan. By applying with a co-applicant, you may increase your odds of approval, since there are more resources going toward repayment.

Definition and Examples of a Co-Applicant

If you apply for a loan with a co-applicant, that person’s income and credit history are considered alongside yours during the application process. A co-applicant can either help or hinder your odds of approval. Both individuals are responsible for repaying the loan, and both enjoy the benefits of receiving the loan.

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.

If your co-applicant has excellent credit history, this can help you receive more favorable loan terms.

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.

Co-Applicant Co-Signer
Shares the responsibility for repaying the loan with another borrower Agrees to take responsibility for the loan if the main borrower can’t repay it
Applies for and benefits from the loan as much as the primary applicant Helps the primary borrower due to their own good credit history
May or may not have a good credit history, income, or assets. Usually has a good credit history and/or sufficient income and assets to smooth loan qualification for the primary borrower.
Is potentially a lower risk for the lender because there are more resources going toward loan repayment Is a lower risk for the lender because the co-signer is responsible for repaying the loan if the borrower can’t

Co-applicants go into the loan application process knowing they’ll repay the loan together. This type of arrangement is often less risky for the lender, since more income and more assets are going toward loan repayment.

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.

Key Takeaways

  • A co-applicant is an additional person applying for a loan with you.
  • Applying with a co-applicant can increase your odds of approval if they have good credit and income, since it’s less risky to the lender.
  • Unlike applying with a co-signer, when you apply with a co-applicant, both individuals are responsible for making regular payments on the loan.
  • Since there are two incomes going toward repayment, you may qualify for a higher loan principal than what you’d receive on your own.
  • A common example of a co-applicant is a married couple applying for a mortgage together.