In the last few months, loan applications in India have been rising. However, many people's loan applications were rejected due to a lack of knowledge or poor credit scores. Individuals needing urgent funds have to look for other options like adding a co-borrower or co-signer to counter this problem or looking for the lowest rate on personal loans.
Co-signer vs. co-borrower
In the co signer vs co borrower scenario, both parties aid in helping an individual qualify for a loan. A co-signer helps a borrower qualify for a loan, while a co-borrower makes the repayment structure feasible. To make an informed decision, one will require understanding the differences between the two options and the benefits of each.
Co-signer vs. co-borrower: What you need to know
We will discuss the differences using a few metrics to understand this properly.
When the principal applicant fails to repay the loan or defaults, a co-signer agrees to accept financial and legal responsibility for the debt. When a borrower with a low credit history applies with a co-signer, they are more likely to qualify for a credit option.
Contrary, a co-borrower applies for a loan alongside another person. They have equal access to the funds that have been distributed.
A co-signer is largely liable for the loan repayment. He accepts legal and financial responsibility for his actions. If the principal borrower fails to settle the outstanding sum, the co-credit signer's score suffers. Simultaneously, if the main borrower makes on-time payments, he may be relieved from legal obligation for the credit.
Both the principal borrower and the co-applicant must return the funds in the case of a co-borrower. The repayment responsibilities are split between the two. This also makes it easier for borrowers to save money and pay off their debt quicker.
A co-signer will not gain directly from the loan. If the borrower uses the money to buy a home or a car, a co-signer will not obtain property ownership, even if he makes payments. The credit will, however, be given to a co-borrower. Both borrowers will have legal rights if the loan sum is used to purchase an asset.