According to a report, there has been a 120% growth in loan applications in India between January and March 2021. However, many loan applications were rejected due to poor credit scores or lack of knowledge.
Individuals needing immediate funds can add a co-signer or co-borrower to increase their eligibility. Nevertheless, knowing the difference between a co-signer vs co-borrower can aid an individual to make an informed decision.
Ideally, a co-signer can help a borrower qualify for a loan while a co-borrower makes the repayment structure feasible. However, choosing the right option pertains to preference and compatibility.
Differences between a co-signer and a co-borrower?
The need for co-signer and co-borrower is relevant when an applicant lacks credibility or doesn’t meet the set eligibility parameters.
For instance, situations like medical emergencies are unpredictable, which leads to substantial expenses. Individuals with a low credit score may find it difficult to even avail an emergency loan online.
In such situations, opting for a co-signer or co-borrower can be beneficial.
However, these options come with variables that need to be evaluated for the right selection. Some pointers are discussed below.
- Purpose
A co-signer is an individual who agrees to take financial and legal responsibility for a loan when the primary applicant fails to make repayment or defaults. Ideally, a borrower with a poor credit history will qualify for a credit option when applied with a co-signer.
However, a co-borrower applies for a loan with another applicant. They have equal access to the disbursed fund.
- Repayment
A co-signer is primarily responsible for paying off the debt. They take legal and financial responsibility. For instance, an individual who borrow money online to finance his/her child’s education takes complete responsibility for repayment.
The credit score of a co-signer reduces if the primary borrower fails to repay the outstanding balance. Simultaneously, they can be released from the legal responsibility of the credit if the primary borrower makes on-time payments.
In terms of co-borrower, both the primary borrower and co-applicant have to repay the fund. The repayment obligations get divided between the two. This is further aids a borrower to make healthy savings to pay off the debt faster.
An individual should also know what happens when a borrower fails to repay a loan. Therefore, borrowers should always keep a financial backup to avoid non-repayment risks.
- Benefits
A co-signer won’t receive any direct benefit from the borrowing. For instance, if a borrower uses the fund to purchase a house or vehicle, a co-signer won’t receive the ownership of the property even if they make repayments.
However, a co-borrower will be the beneficiary of the credit. If a primary borrower buys an asset with the loan amount, both the borrowers will have legal rights.
It is imperative to know that individuals with a poor credit score can increase their eligibility for a high-value credit form like a personal loan by adding a credible co-borrower.
This is how a co-borrower can increase the chance of getting a personal loan approved without hassle.
These are some crucial pointers that show the differences between co-signer vs co-borrower.
When to opt for a co-signer or co-borrower?
As discussed earlier, a co-signer or co-applicant is needed only when a borrower cannot make repayment or meet the eligibility parameters.
It is recommended to go for an independent loan application if the credit score falls in the required range.
Individuals should practice making timely repayments, clearing outstanding debts, avoiding multiple loan applications, pre-payments, etc., to improve credibility for improved loan eligibility.
One can opt for unsecured credit forms, such as a Low Interest Personal Loan that extends substantial funds against simple eligibility. The flexibility of usage also makes it ideal for big-ticket spendings.
Additionally, finding the right lender would make the borrowing lucrative. They can gain added benefits and personalised offers.
For instance, lending institutions like Bajaj Finserv provide pre-approved offers to credible applicants. These offers make the loan application hassle-free. Such offers are available on financial products like personal loans and business loans, etc. Check your pre-approved offer online by entering your name and contact number.
The requirement for immediate funds is unpredictable. In such a situation, an applicant with a poor score can opt for a co-borrower or co-signer by assessing the differences.
One can refer to the pointers explained below to understand the difference between a co-signer vs co-borrower for the said purpose.
