Whether you're bringing a co-borrower or guarantor with you when you apply for a loan, it's good to know what rules apply to them.
A co-borrower is a person with whom you share the loan. This is often a cohabitant or spouse. A co-borrower is responsible for servicing the loan in the same way as the main borrower. If the main borrower is unable to service the loan, the co-borrower will be responsible for the loan.
A guarantor is a person, usually a family member, who provides their home as security for you if you are unable to provide your own home as security. A guarantor can also have part of a loan as security. A guarantor is a person who is not involved in applying for the loan, but who provides a form of guarantee that the loan will be repaid.
The guarantor is therefore not responsible for using or servicing the loan, but will be contacted by the lender if the borrower cannot or will not repay the loan. The guarantor has the responsibility to repay the loan in this case, but not necessarily the right to use it.
It is important to keep in mind that being a co-borrower or guarantor can have a financial risk and can affect your own finances. Therefore, you should carefully consider taking on this role before agreeing to be a co-borrower or guarantor.