Know the Differences Between Co-Signers and Co-Borrowers

As per recent reports, the Reserve Bank of India stated that personal loans recorded year-over-year growth of 13.5% in March 2021. Given the advantages of these loans, such a growth rate is quite evident. However, individuals willing to acquire this credit instrument to fund their financial requirements must be aware of several vital aspects. One such aspect is the difference between co-signer vs co-borrower.

Who is a co-borrower?

A co-borrower is an individual who is equally responsible for the repayment of the acquired personal loan amount. In other words, co-borrowers are co-owners of the acquired credit and hence share the EMI payments and loan proceeds. They also enjoy the applicable tax benefits on the acquired credit instrument.

Who is a co-signer?

On the other hand, a co-signer is a person who signs the application for a personal loan and agrees to take on the liability for repayment in case the borrower fails to pay off the debt.

This implies that a co-signer needs to repay the loan amount only in the case of defaults, further indicating that the concerned person is responsible for repaying the loan without any benefits of ownership or right to the asset.

The co-signer acts as a kind of security for the lending institution and helps mitigate the risk of default. Moreover, borrowers with a low CIBIL score for personal loans stand a chance to acquire substantial credits if they apply along with an eligible co-signer. In simpler terms, a co-signer is similar to a guarantor, increasing a borrower’s chances of acquiring unsecured credit.

Individuals must always ensure to keep a decent credit history and credit score. This will allow them to enjoy several offers extended by the financial institutions. For instance, individuals can benefit from several pre-approved offers provided by reputed financial institutions. These offers are provided on both secured and unsecured financial products. They help accelerate and simplify a lending process. Individuals can check their pre-approved offers by giving a few details, such as their names and contact numbers.

Factors to know before proceeding with a loan along with a co-signer or a co-borrower

One must be aware of some factors before going forward with adding a co-signer or co-borrower while acquiring an emergency loan online. These are illustrated below:

• The credit report of a co-signer or co-borrower also gets affected if one fails to repay a personal loan.
• The co-signer’s name cannot be removed from a loan until it is paid off.

Eligibility criteria of a personal loan

Individuals willing to borrow money online for meeting urgent financial requirements can opt for an unsecured personal loan. These can be acquired without any hassle and also come with zero end-use restrictions, thereby implying that individuals can use a personal loan for travel, home renovation, and various other purposes.

Besides knowing the various aspects of a co-signer vs co-borrower, prospective applicants must know the eligibility criteria before applying for this credit instrument. These are listed below:

• Applicant must be a resident of India
• The age of the individual should be between 21 years and 67 years
• The applicant must be a salaried individual employed with an MNC, private or public organization
• The individual must have a decent credit score

Individuals must note that there is also a minimum salary requirement for these loans, which vary as per the applicant’s city of employment.

Documents required for acquiring a personal loan

Along with the eligibility criteria and vital aspects of co-signer vs co-borrower, it is imperative for all prospective applicants to keep in mind the various documents required for acquiring a personal loan. Given below is the list of documents required while applying for this credit instrument:

• Salary slips of the past few months
• KYC documents
• Bank account statements of last few months
• Employee ID card

Applicants failing to meet the eligibility criteria for a personal loan can choose to apply with a co-borrower or co-signer as this will help get the application processed easily. But they must keep in mind the various aspects of co-signer vs co-borrower mentioned above.

It is essential that before deciding on co-signer vs co-borrower, individuals must have a candid conversation with the borrowing party. After that, one must determine whether they meet/exceed the eligibility or not, as certain lending institutions like Bajaj Finserv extend attractive offers for existing customers upon meeting the eligibility. These offers, also known as pre-approved offers, streamline the application process and help towards a hassle-free loan application procedure. You can check your pre-approved offer simply by entering your name and contact number.

With adequate knowledge about co-signer vs co-borrower, individuals can make the right decision by asking a few questions regarding their income stability and how co-signing or co-borrowing could affect their future goals.

In simple terms, co-signing might be helpful to those unable to meet lender specific requirements, and co-borrowing might be ideal for such applicants who want to share the responsibility of the loan payments and access the assets tied up with the loan.