A co-signer is a person that guarantees repayment of a loan in the event that the primary borrower cannot make the monthly payments.

What is a co-signer?

A co-signer is an additional repayment source for a loan. He or she works cooperatively with the primary borrower. As a result, he guarantees the loan and has an equal responsibility to pay back the entire debt.

If the primary borrower can’t make the monthly payments, the co-signer must pay. If both parties fail to repay the loan and the loan goes into default, the default will appear on both credit reports.

Additionally, since this debt is the co-signer’s as well, he is thereby reducing the amount of credit available to him. The debt from his co-signed loan is calculated in the co-signer’s debt-to-income ratio, which influences his credit limit on credit cards and loan amounts on future loans.


When taking out a loan, the primary borrower should have a good to excellent credit score and stable income. However, if you don’t meet those approval criteria, a co-signer may help. By adding one to your loan application, the lender now reviews the co-signer’s financial information in addition to yours.

A co-signer is especially helpful if your income is insufficient to qualify for the loan amount. A lender will assess the mortgage’s affordability in relation to the co-signer’s income. In fact, his income may even qualify you for a larger loan.

Lenders like loans with a strong co-signer. As a result, they may even offer a lower interest rate, more flexible repayment, and even lower fees. If yours has excellent credit and generous income, you may now be eligible for a more attractive loan that you may have otherwise been unable to be approved for.


If the primary borrower has truly poor credit, a co-signer may not help the loan application, and his role is more beneficial for a person who has yet to establish a credit history, such as a young person trying to take out a student loan.

Alternatively, if your co-signer has poor credit or insufficient income, he or she may not be able to assist in the loan approval process.

Co-signer Versus Co-borrower

A co-signer is a backup payer. On the other hand, a co-borrower, also known as a joint applicant, applies for the loan with another borrower. Both are equally responsible for the repayment of the loan.

The main difference between these two is ownership. A co-borrower has an ownership interest in the property. Unfortunately, a co-signer only guarantees the loan but does not own the property.