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Guarantor vs Cosigner: What Are the Differences?

By Jamie Cattanach · March 08, 2022 · 5 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

Guarantor vs Cosigner: What Are the Differences?

Both guarantors and cosigners add their signature along with yours on a loan application or lease in order to strengthen your odds of approval.

But even though these two roles are similar, they’re not exactly the same. And understanding the difference is vital when it comes time to decide which one you need.

Here’s what you need to know.

Is a Guarantor the Same Thing as a Cosigner?

The short answer: No.

Guarantors and cosigners fulfill similar roles: They make it possible for a primary applicant to be approved for various types of personal loans and other financial products by lending their credit reputation and financial obligation to the application.

But when it comes to the scope of that financial obligation — and the rights they have to the loaned asset — things start to diverge.

What Is a Guarantor?

A loan guarantor is someone who vouches for the primary loan applicant, pledging their legal obligation to repay the loan if the primary borrower fails to repay the loan.

In other words, a guarantor is like a back-up plan for the lender — and as such, those lenders might offer guarantor loans to applicants who wouldn’t qualify on their own.

The guarantor is not responsible for repaying the debt unless and until the primary borrower fails to make their payments and the loan is at risk of being in default.

Additionally, guarantors don’t have any legal right to the loaned money, anything purchased with the loan proceeds, or to live in the dwelling if they’re acting as a guarantor on a lease.

What Is a Cosigner?

A cosigner also pledges their financial responsibility in the event the primary borrower fails to make payments — but that liability begins right away, as opposed to beginning once the primary applicant is at risk of defaulting. For example, many parents act as cosigners on their children’s student loans, since young people tend not to have long and robust credit histories.

Cosigners are also different from co-borrowers in that they don’t have any claim on the loaned asset. For example, if someone cosigns an auto loan for you, they might not have an automatic right to drive the car — whereas if you and your partner apply as co-borrowers, you’d both eventually be listed as owners on the vehicle’s title, once the loan is paid off.

Recommended: Getting a Personal Loan with a Co-Applicant

Guarantor vs Cosigner: The Differences

The main difference between a guarantor and a cosigner is the level of legal liability for the debt or borrowed asset.

A cosigner is responsible for repayment of the debt as soon as the agreement is final and can request to have loan statements sent to them so they’ll know right away if any payments have been missed.

A guarantor is only responsible for repayment of the debt if the loan is in danger of being in default and will only be notified at that point.

Financially, there are also some important differences:

•   The primary borrower and the cosigner share equal financial responsibility from the beginning, which means if either party doesn’t make payments according to the loan agreement, both of their credit scores could be negatively affected.

•   A guarantor isn’t expected to make payments unless the primary borrower is at risk of defaulting on the loan. If that does happen, it could make it more difficult for the guarantor to obtain credit in the future. If the guarantor cannot make payments on the loan, the credit of both parties can be adversely affected.

Cosigner

Guarantor

Legally responsible for repaying the loan or borrowed asset immediately. Legally responsible for repaying the loan or borrowed asset if the primary borrower is at risk of defaulting.
Can request regular statements so they’re aware of any missed payments immediately. Are only notified when the primary borrower is at risk of defaulting.

Recommended: How to Get Approved for a Personal Loan

Guarantor vs Cosigner: The Similarities

Guarantors and cosigners are more alike than they are different. At a glance:

Cosigner

Guarantor

Pledges their financial responsibility for the debt to strengthen the primary borrower’s application. Pledges their financial responsibility for the debt to strengthen the primary borrower’s application.
May not have any right to the loaned money or asset (exception: the cosigner on a lease, who may be entitled to live on-site). May not have any right to the loaned money or asset.

Personal Guarantor vs Cosigner: Pros and Cons

As the primary borrower, when deciding between a guarantor and cosigner, the choice may come down to which kinds of loans are available (guarantor loans can be harder to find than loans allowing a cosigner) and what kind of agreement you’re entering into. If you’re signing a lease with a roommate, that person should be a cosigner rather than a guarantor.

Pros of Guarantors

Cons of Guarantors

Pros of cosigners

Cons of cosigners

Can help strengthen your application. It can be stressful if you default and force your guarantor into the position of repayment. Can help strengthen your application. Having to ask someone to cosign for you can be intimidating.
Guarantors are only responsible if you default — their actions don’t have an impact on your finances unless they also fail to repay the debt. If signing a lease, guarantors generally aren’t allowed to live on-site. If signing a lease, a cosigner can be your roommate. If your cosigner fails to pay, that can impact your credit history, too.

Do Guarantors Get Credit Checked?

Yes — as part of the application process, both you and your guarantor (or cosigner, for that matter) will have your credit checked. Generally, the guarantor will need a more robust credit history and income verification in order to cover for a primary applicant’s shortcomings.

Recommended: How to Build Credit Over Time

Are You a Cosigner or Guarantor on Any Debt or Loans?

The only way to find out if you’re currently a cosigner or guarantor on any debt or loans is to review your paperwork. Reading legal or financial agreements in full before signing is important, as well as keeping copies of the agreements to refer to in the future.

When Is a Cosigner or a Guarantor a Good Option?

There are many reasons people choose to apply for unsecured personal loans, but not all personal loans are appropriate for all personal loan uses. For instance, if you’re planning to use a loan to consolidate existing, high-interest debt, it may be worth asking a guarantor or cosigner to help you meet that goal — whereas applying for a loan to take a vacation might not be so wise.

If you’re looking to build your credit history and need extra cash or a line of credit, you might consider an alternative such as a secured credit card or flex loan.

Only you can decide if going into debt is the right move in your scenario — but if your application could use a boost, a cosigner or guarantor could help.

Questions to Ask a Guarantor or Cosigner

One of the weightiest parts of making the decision to use a cosigner or guarantor is the process of actually asking someone to do you this favor, which is a big one. It’s important that there’s mutual trust in the relationship between the borrower and cosigner or guarantor, since their actions can have an impact on each other’s finances.

Some questions to ask your cosigner or guarantor before entering an agreement include:

•   Do you have a good credit score and solid financial standing?

•   Are you willing to take on this legal and financial responsibility?

•   What will our long-term agreement be if I, as the primary borrower, fail to make repayments and force you into the legal obligation to do so?

Personal Loans That Allow You to Use a Cosigner or Guarantor

Not all lending institutions allow applying for personal loans with a cosigner or a guarantor. If you aren’t able to qualify based on your own creditworthiness, you may consider asking the lender if they’ll allow a cosigner or guarantor. Comparing lenders until you find one that best fits your financial situation and needs is a good place to start.

The Takeaway

Guarantors and cosigners fulfill similar roles for a loan applicant, strengthening the application by taking on some level of financial responsibility for the loan.

SoFi offers a wide range of unsecured personal loans with competitive, fixed interest rates and with loan amounts to accommodate a variety of financial needs. We don’t charge origination, prepayment, or late fees, and you can check your rate in just one minute without affecting your credit score.*

Check your rate on a SoFi Personal Loan


Photo credit: iStock/FreshSplash

*Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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