Guarantor vs. Cosigner: What’s the Difference?

Man Signing LoanAnyone who needs to borrow money but can’t convince lenders to extend a loan may wish to investigate the difference between guarantor vs. cosigner. Both act as a secondary guarantee for the lender against the loan going bad, and both are responsible if the primary lender defaults. That said, there are differences.

The Responsibilities of a Cosigner

Essentially, a cosigner is just as liable for paying back a loan as the primary borrower — that’s why they cosign the loan.

This is often a good option if the primary borrower doesn’t have finances strong enough to qualify alone. The lender will review financial statements and credit reports from both the primary borrower and cosigner to calculate the debt-to-income ratio. This shows how much the added income affects how much can be borrowed.

Any extra income put forward by a cosigner can help the borrower qualify for a loan that would have been out of reach.

The Responsibilities of a Guarantor

Having a guarantor on the loan provides much the same benefits as a cosigner — they act as a secondary form of repayment, but the difference is in how their own assets are accessed.

If a cosigned loan goes bad, the cosigner is just as liable as the primary borrower, so the lender will have the right to pursue both immediately. Even if the cosigner has no interest in the loan itself, their income and assets will be at risk if the lender decides to take legal action.

In contrast, a guarantor will only become liable when the lender has exhausted all collection options against the primary borrower. This is why becoming a guarantor is slightly less risky than acting as a cosigner, although you’ll still be locked into the loan from the second documents are signed.

Xpress Cash Can Help You Navigate the World of Personal Loans

It doesn’t matter if you’re worried about personal loans affecting your credit rating or ready to investigate personal loan benefits — the team here at Xpress Cash can help. Contact us today or feel free to visit one of our branches across Idaho, Wisconsin, and Michigan.