When applying for a mortgage or a loan for a large amount, banks usually require a co-borrower. Thanks to this, the borrower can count on more favorable lending conditions, and the bank receives an additional guarantee of fulfillment of financial obligations. We have considered in detail the features of drawing up such a loan agreement in this article.
Who is a co-borrower on a mortgage or other loan?
To understand the question of who is a co-borrower, you must first determine who is called a borrower. This word refers to a client who applies to a bank for a loan. That is, a borrower is a person who borrows money from a financial institution at interest for a certain period.
When issuing a loan, banks try to minimize risks. Especially if the borrower needs a large sum or his income is not enough to repay the loan. One way is to involve a co-borrower in the transaction (a person who is ready to share the responsibility and obligations under the loan agreement with the borrower).
If the borrower for some reason, for example due to temporary armenia mobile database disability, cannot make monthly payments in accordance with the established schedule, this responsibility is assigned to the co-borrower. For the bank, this is an additional guarantee that the loan will be repaid on time and in full. In this case, the client applying for the loan receives the status of the title borrower.
There may be several co-borrowers for a loan or mortgage - the exact number depends on the bank's requirements and becomes known after the application has been reviewed.
Formally, the title borrower must repay the debt: the loan agreement is drawn up in his name and the account is opened. However, in practice, financial institutions do not track who exactly made the next payment. The main thing is that the payment is received on time and in full.
It is important to keep in mind that a loan issued by the title borrower is reflected in the co-borrower's credit history. In order not to spoil the file with negative entries, it is necessary to control the loan repayment process and be ready to insure the borrower by transferring the monthly payment instead of him.