Co-signer vs. Co-borrower: What's the Difference?
Learn the differences between co-signers and co-borrowers, as well as the pros and cons of each option.
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Introduction
When applying for a loan or credit card, you may come across the terms "co-signer" and "co-borrower." These terms may seem interchangeable, but they have distinct roles in the credit application process.
What is a co-signer?
A co-signer is someone who agrees to take responsibility for a loan or credit card with the primary borrower. The co-signer pledges their own creditworthiness to help the primary borrower get approved for credit and guarantees the debt will be paid if the borrower is unable to make payments.
In most cases, co-signers are used when the primary borrower has a low credit score or short credit history. By having a co-signer on the application, the lender or creditor may feel more comfortable extending credit to the primary borrower.
What is a co-borrower?
A co-borrower is someone who applies for credit jointly with the primary borrower. Unlike a co-signer, a co-applicant is equally responsible for paying back the loan or credit card debt. Both parties share the benefits and drawbacks of the credit account, and both credit scores will be affected by the account.
Co-borrowers are typically used when both parties will be using the credit account for a joint purpose, such as a mortgage loan or a joint or credit card for shared expenses.
Key differences between co-signers and co-borrowers
The main difference between a co-signer and a co-borrower is the level of responsibility they have for the loan or credit card debt. Co-signers are responsible only if the primary borrower is unable to pay, while co-borrowers are equally responsible for the debt.
Additionally, co-signers do not have access to the loan funds or credit card, while co-borrowers can use the loan funds or credit account.
Pros and cons of co-signers
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Pros and cons of co-borrowers
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When to choose a co-signer or co-borrower
Choosing between a co-signer and a co-borrower depends on your situation. If you have poor credit and need help getting approved for credit, a co-signer may be a good option. If you're applying for credit jointly with someone and plan to use the account equally, a co-borrower may be a better choice.
Regardless of which option you choose, it's important to discuss the risks and responsibilities with the other party and make sure you're both aware of the potential outcomes.