Co-Signer or Co-Borrower: What's the difference

Occasionally, we bankers find ourselves looking at loan applications where the borrower isn't quite qualified on their own to borrower money. In most cases, this is because of a limited credit history or a slightly blemished credit record. When this happens, we might ask for a co-signer to help support the loan request.

The co-signer on a loan agrees to be legally obligated for the repayment of the debt. The co-signer must have an established and very good credit history. And because they will be legally obligated to repay the debt in the event that the borrower defaults, the co-signer must be able to qualify for the loans on their own merits.

This is in contrast to a co-borrower. A co-borrower credit history, income and assets are considered together with a primary borrower to qualify for a loan. Instead of qualifying individually, the primary and co-borrower are able to combine their income and assets into one in order to meet the lenders borrowing criteria.

To summarize, a co-signer is someone who is willing to take over the repayment of the loan should the borrower default. A co-borrower is someone who is borrowing money together with someone else. The co-borrower receives the proceeds of the loan while a co-signer does not.




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