If you want to borrow a large amount of money, it may be easier not to do it alone, you can find a co-borrower or even several.
A co-borrower is a person who signs a bank loan agreement with the borrower and, as a result, receives the same rights and obligations as the principal debtor. A co-borrower of a bank is an equal participant in a bank loan, to which the creditor has the right to demand the fulfillment of all obligations, as well as the main debtor.
It is often confused with the guarantor. However, these are two different roles that have similar responsibilities but differ significantly in rights.
Differences between guarantor and co-borrower
A co-borrower is most often required when the borrower does not have sufficient income to pay a future loan, and another person with income is required to collectively cover the loan payments. As you know, for the service of a loan, the law allows the payment of no more than 50% of the officially confirmed income. In the case of the guarantor, her income does not affect the amount of the future loan, since she acts only as a guarantor in case of default of the obligations of the principal debtor.
Therefore, this is involved if the income of the borrower to obtain the required loan amount is not sufficient. And the income of the guarantor is not taken into account when calculating the maximum loan amount of the borrower, and it does not affect the loan amount either. The differences also apply to solvency requirements. If the creditworthiness of the co-borrower is added to the creditworthiness of the borrower, then the creditworthiness of the guarantor must be sufficient to independently repay the loan payments along with interest.
This figure is needed when large loans are requested, such as a mortgage, for example, and the borrower herself needs it, but the bank needs a guarantor to minimize the risks of debt repayment. The borrower can attract both a co-borrower and a guarantor at the same time.
Who can exercise this figure?
Anyone can be. Most often, they are close relatives: spouses, parents, children, brothers, and sisters, less often common-law spouses, business partners, colleagues, and friends.
It should be noted that when registering a mortgage loan with a bank, legally married persons must act as co-borrowers. For example, if a spouse prepares a mortgage, then, accordingly, he shares the entire burden of the loan with his wife, who, in the event of a divorce, is entitled to this living space on an equal basis with her husband. For many banks, this condition is mandatory.
Is it possible to review the terms of the contract?
The terms of the loan agreement, in which the borrower and the co-borrower participate, can only be changed if the agreement provides for it. If the co-borrower wishes to terminate the agreement, a replacement will most likely be required.
To review the contract, there must be weighty conditions, for example, a divorce, because when issuing a loan, the bank took into account the income. But, as a general rule, the decision is left to the bank.
When changing the agreement, the borrower, the former co-borrower, the new borrower, and the bank representative must be present. In this case, an additional agreement to the contract is signed.
Rights and obligations
A joint and several obligations is an obligation of the plurality of persons, under which each creditor has the right to demand, and each debtor is obliged to fully comply with the obligation.
In the case of joint and several obligations of the debtors, the creditor has the right to demand compliance from all the debtors, even any of them separately.
Joint and several debtors remain liable until the said obligation is fully fulfilled. This means that anyone who agrees to become a co-borrower of a loan should know that by signing a loan agreement, they become a participant together with the borrower himself, that is, he assumes full joint responsibility with the borrower.
Regarding rights, unlike the guarantor, the co-borrower has a joint and several rights to participation in the loan, in the case of acquiring a property, he has the right to become a co-owner of the acquired property.