Understanding Differences Between Co-Borrower and Co-Signer in Education Loans

Banks and NBFCs (Non-Banking Financial Companies) offer various education loan options, but many students fail to be eligible for these education loans on their own. The reason is you need a co-borrower or a co-signer to qualify for an education loan. These roles help the main applicant, that is the student, to get education loans, but they come with responsibilities. Understanding the difference between a co-borrower and a co-signer is crucial before applying for an education loan. In this article, we will explore these two roles in detail, discuss their advantages and disadvantages, and help students and families make informed decisions.

Who is a Co-Borrower?

A co-borrower, also known as a co-applicant, is a person who applies for the loan along with the primary borrower. The co-applicant meaning is simple, it means that person shares equal responsibility for the loan repayment. In education loans, parents or guardians usually are the co-borrowers.

Key Responsibilities of a Co-Borrower:

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  A co-borrower shares equal responsibility for repaying the education loan
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  The loan is marked on both the borrower’s and co-borrower’s credit reports.
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  The financial status of both applicants is considered for education loan approval.
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  If the primary borrower is unable to repay due to any reason, the co-borrower must take full responsibility.

When is a Co-Borrower Required?

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  When a student applies for an education loan in India, almost all lenders require a co-borrower.
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  Banks and non-banking financial companies (NBFCs) require a co-borrower for repayment security.
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  Another reason for co-borrower is for contact purposes. Even for loans with collateral, you need to have a co-applicant or a co-borrower.

Learn Co-applicant meaning and how they affect your education loan from the video below:

Who is a Co-Signer?

A co-signer is someone who guarantees a loan for another person but does not share the ownership or equal repayment responsibility. A co-signer has to take responsibility only if the primary borrower fails to repay the education loan on time.

Key Responsibilities of a Co-Signer:

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  The co-signer is responsible for loan repayment in case the primary borrower fails to repay.
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  Their credit score may be affected if the borrower defaults.
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  The loan does not have direct benefits for the co-signer.
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  The lender checks the co-signer’s financial stability and CIBIL scores to determine loan approval.

When is a Co-Signer Required?

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  Co-signers are more common in the United States, where students may not have enough credit history.
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  Private lenders require a co-signer for loans without collateral.
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  A co-signer is also required when the borrower does not meet the lender’s eligibility criteria.

Comparison Between Co-Borrower vs. Co-Signer

Now that you have an understanding of co-applicant meaning, co-borrower meaning, let us compare them on some of the objective factors from the table below:

Co-Applicant Meaning and Requirement for Indian Students

In India, lenders require a co-borrower or a co-applicant for education loans. A parent or guardian is the most common choice. The co-borrower’s financial stability and credit history plays a very important role in deciding education loan approval and its terms. The better the CIBIL score, the better will be the loan terms. Lenders also check both the student’s and co-borrower’s income, to make sure that the repayments do not fail.

Cosigner Requirement for International Students

Students studying abroad, especially in the U.S. may not have a credit history, and that is why they require an American co-signer for private loans or US credit cards.

Understanding the roles, responsibilities and risks of a co-borrower and a co-signer is very important when it comes to an education loan. Whenever cosigning a student loan pros and cons must be considered before making a decision. Co-borrowers share equal responsibility for loan repayment, while co-signers act as a financial backup if the borrower defaults. If you are planning to study abroad and looking for education loan options, then we at GyanDhan can help you with your journey. All you need to do is check your loan eligibility and one of our education loan expert will dedicated for you and will guide you through the entire process and that too for free.

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