It is now common practice that the loan application by the bank, the question of a co-applicant is asked. For the lenders, a second applicant is always the preferred solution. Depending on the size and nature of the loan, the commitment is even made dependent on a co-applicant. The loan seeker, on the other hand, should consider carefully whether a loan without a co-applicant is not more useful.
In the case of a loan without a co-applicant, all rights and obligations lie exclusively with the applicant. Only his credit rating is checked and the fulfillment of the contract is one of his tasks. Legally, he is the sole debtor of the contract, but also sole claimant. This is different for a loan with two borrowers. Both are liable as so-called joint debtors for the entire loan amount, the proper repayment of the loan amount and are also listed as a borrower in the credit entry. The bank has the right to vote, in which, unlike a loan without a co-applicant or only with a guarantor, it can demand the installment from one of the parties at any time. If the main lead applicant is in default, she may demand that the other one continue without further legal action. Even if the co-applicant actually acted only to support, he is now in the payment obligation. It is up to him to get the money back from the other applicant. He is also not relieved of the credit institution if he pays about half of the loan amount. He is liable for the total amount.
Delineation to the guarantee
For a long time, it was customary to grant a loan without a co-applicant, but then to secure it with a guarantee. The guarantor declares that he is liable for the claim if the borrower can no longer pay. In the case of a simple guaranty, he is entitled to the defendant’s plea, which means that the bank must first unsuccessfully execute foreclosure before it can even comply with the guarantor. However, this plea, which delays the implementation of the guarantee debt, can be excluded at the expense of the guarantor in the guarantee contracts. Guarantees are now more commonly used as rent guarantees, and lenders prefer lending because of the benefits of joint and several liability to co-applicants.
Advantages and disadvantages of co-applicants
Even though banks prefer two borrowers, a loan is also granted without co-applicants. This depends a lot on whether the applicant has a good credit rating even without a second applicant and that his proven income makes it probable that he meets his installment obligation. For the applicant, a loan without a co-applicant, especially in manageable consumer loans makes sense. He does not have to seek a second applicant and the preferred spouses remain unaffected in their credit rating. If it comes to difficulties in the repayment, eliminating the access to the partner, which thus remains able to act.
Depending on the amount of the loan amount and income, however, a co-applicant increases the likelihood of obtaining the desired loan on favorable terms. If both applicants income increases the available loan amount compared to a loan without co-applicants. Also, the consideration that when financing for a joint purchase, both are liable for the same, plays a role.