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Using a Co-Borrower on Your Loan

June 04, 2018 · 3 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Using a Co-Borrower on Your Loan

Qualifying for a loan is sometimes easier said than done. Just because you need a mortgage to buy your first home, or a personal loan to pay off credit card debt, doesn’t mean a lender is going to magically understand and give you the exact loan and interest rate you want.

Thankfully, if you’re struggling to qualify for a loan, you can have a friend or family member step in to help. Essentially, you can leverage their income, credit score, and financial history to help you get the right loan.

The downside is that this type of borrowing (as in, borrowing money with another person) can get a little jargon heavy. Co-borrower, co-applicant, and co-signer are all terms that are going to come up.

A co-borrower basically takes on the loan with you. Their name will be on the loan with yours, making them equally responsible for paying back the loan. They will also have part-ownership of whatever this loan buys—for example, they will own half of the home if you take out a mortgage with a co-borrower.

A co-applicant is the person applying for the loan with you. Once the loan is approved, the co-applicant becomes the co-borrower.

A co-signer helps you qualify for a loan, but isn’t your partner on the loan like a co-borrower. A co-signer does not have ownership over a loan, and would only help make your loan payments if you were unable to make them.

We’ll dig a little deeper into co-borrowers and co-signers to help you decide which is right for you.

How does signing a loan with a co-borrower work?

Co-signing assures lenders that you’ll be able to pay back your loan. You typically use a co-signer with a stronger financial history than you, which can help you get a loan you might not qualify for on your own. Lenders might be more comfortable lending to you if your co-signer has a good credit score and a dependable income.

For example, a parent might co-sign their child’s mortgage, allowing the child to get a lower interest rate on their mortgage. The parent wouldn’t own the home, but they would have to make mortgage payments if their child couldn’t.

When does it make sense to have a co-signer rather than a co-borrower?

You’d use a co-signer when you know that you can’t qualify for a loan by yourself, whether because you don’t have enough credit history, your credit score isn’t great, or you don’t earn enough to qualify for your desired loan. A co-signer acts as a safety net if you’re unable to make payments on the loan.

When does it make sense to have a co-borrower?

Let’s go back to the example of a parent helping their child qualify for a mortgage loan. If that parent was a co-borrower instead of a co-signer, they would own the home with their child in addition to being equally responsible for the monthly mortgage payments.

Typically, spouses co-borrow when buying property, or business partners co-borrow if they are taking out a personal loan for their business. You and your co-borrower may qualify for a larger loan than if you were to take out a loan solo, and this way, you both own the investment and are responsible for loan payments.

The great thing is that some companies, like SoFi, now allow you to co-borrow on low interest personal loans. That means you and your co-borrower (whether they’re your spouse, business partner, or a member of your family) can qualify for an even better interest rate and fund your financial goals that much more easily.

Co-borrow on a personal loan and make your financial dreams a reality. Check out SoFi Personal Loans.


SoFi Mortgages not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com for details.
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