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Know The Differences Between a Co-Signer and a Co-Borrower

Since personal loans are unsecured credit instruments, they come with stringent eligibility parameters, and there can be cases where an applicant may not fulfil the criteria. In such scenarios, individuals may choose to apply for the loan with a co-borrower or co-signer, which will help the application get processed quickly. 

But before that, potential applicants must be aware of the differences between Co-signer vs Co-borrower.

Who is a Co-Borrower?

A co-borrower is an individual who takes equal responsibility to repay the personal loan amount. In other words, a co-borrower is a co-owner of the credit and share the loan proceeds, EMI payments, and tax benefits (if any). 

Who is a Co-Signer?

A co-signer is someone who signs a personal loan application and takes the repayment liability in case the borrower fails to repay the debt. In simpler terms, co-signers only need to repay the loan amount during a default. Thus, co-signers take the responsibility to repay the credit without any right to the asset or ownership benefits.

A co-signer’s role for this credit instrument is similar to that of a guarantor, aiding concerned applicants to increase chances of procuring the loan. In addition, co-signers act as security to the lending institution and help mitigate the risk of default. That is why opting for this loan becomes much easier when applied with a co-signer. Moreover, with an eligible co-signer, an individual with a low CIBIL score for a personal loan stands a better chance of opting for a greater credit amount. 

Factors to keep in mind before proceeding to apply with a co-signer

Now that the differences between co-signer vs co-borrower are clear, it is imperative to focus on other vital aspects. Illustrated below are a few factors that individuals must keep in mind before they proceed to apply for a personal loan with a co-signer:

  • The name of a co-signer cannot be removed from the personal loan until the time it is completely repaid
  • If a primary applicant fails to repay the loan, the details regarding this non-payment will reflect on the co-signer’s credit report.

Things to keep in mind regarding applying with a co-borrower

Given below are the various things individuals must keep in mind while applying for an emergency loan online with a co-borrower:

  • Usually, financial institutions do not allow any person to become a co-borrower. In general, only the primary applicant’s parents or spouse can be a co-borrower. Some lenders may also allow siblings to function as co-borrower for a credit instrument. Hence, potential applicants willing to borrow money online via a personal loan must check with their financial institution regarding such provisions.
  • Lenders consider the joint income when an individual applies for a personal loan with a co-borrower. Hence, if the primary applicant’s salary is inadequate, the co-borrower’s income helps bridge the gap. Furthermore, a co-borrower having a substantial income helps make an individual eligible for a higher credit amount at a nominal interest rate. 
  • A co-applicant with a decent CIBIL score certainly boosts the primary applicant’s eligibility. But at the same time, a poor credit score can hamper the applicant’s chances to procure a personal loan.

Besides knowing the various aspects of co-signer vs co-borrower, potential borrowers must always opt for reputed lenders for their personal loans. This will help them benefit from several offers. For instance, renowned lending institutions extend several pre-approved offers on both secured and unsecured financial products. They help accelerate and simplify the lending process. Individuals can check their pre-approved offers by providing details like their name and contact number. 

This credit instrument comes with zero end-use restrictions, implying individuals can opt for a personal loan for travel, house renovation, and several other purposes. However, non-fulfilment of eligibility parameters can keep one away from procuring the credit, and applying with a co-borrower or co-signer may be the only option. Therefore, individuals must keep in mind the above-mentioned differences between co-signer vs co-borrower.

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