You want to take out a loan, but the bank believes that your income is not enough, and offers to attract a co-borrower or a guarantor. Or vice versa: you are asked to become a co-borrower or vouch for someone else's loan. We understand what the differences are and what you risk by agreeing to this or that role.
What is the difference between a co-borrower and a guarantor?
A co—borrower is the same borrower. He has the same rights and obligations as if he himself took out a loan. Even when you are persuaded to sign a contract only "for show" and you will not use the loan money, you bear a great responsibility. If the main borrower for some reason will not be able to pay the loan on time, the money will have to be paid by the co-borrower.
The guarantor vouches for the borrower — guarantees the bank that the loan will be returned within the agreed period. The guarantor is not obliged to monitor the borrower's payment schedule. If he is late with the payment for a couple of days, the guarantor is in no danger. But if the delay is serious, the bank will make demands to the guarantor — and then the debt will be reflected in his credit history.
On large loans, both co-borrowers and guarantors can be attracted at the same time. If the borrower stops paying, the co-borrower will have to repay the debt. If he also does not make payments, then the guarantor will have to pay.
Let's take a closer look at how the requirements for co-borrowers and guarantors differ, their capabilities and responsibilities.
What documents do I need to provide?
Usually, the co-borrower must provide the bank with the same set of documents as the borrower: passport, SNILS or INN, marriage certificate, income statement, a certified copy of the employment record. Each bank can have its own set of documents.
Sometimes the list of documents for the borrower and the co-borrower may differ. For example, under the family mortgage program, the main borrower must provide birth certificates of children, and the co-borrower does not need to do this.
In most cases, the guarantor must provide only a passport, a certificate of income and a certified copy of the employment record.
The co—borrower signs the loan agreement together with the borrower, but the guarantor does not. The bank enters into a separate surety agreement with him.
If the loan agreement provides for mandatory registration of insurance, then the co-borrower will have to sign an insurance contract. This is usually not required from the guarantor.
Is it possible to change the loan size and interest rate with the help of guarantors and co-borrowers?
The financial position and credit history of the co-borrower directly affect the terms of the loan. The bank checks the co-borrower in the same way as the borrower: place and work experience, income, financial discipline. The amount of the loan, the percentage and the period for which it is issued may depend on the results of the check.
As a rule, the higher the income of the co-borrower, the greater the amount the bank is willing to lend. If the financial situation of the co-borrower inspires confidence in the bank, then this can lower the interest on the loan.
But the income and credit history of the guarantor almost never affect the parameters of the loan. Most often, the bank simply informs whether such a guarantor is suitable for him or not.
Does the borrower's debt affect the credit history of the co-borrower and the guarantor?
In the co-borrower's credit history, full information on the loan of the main borrower appears, including the payment history. Moreover, the outstanding part of the loan is considered the debt of the co-borrower. If he wants to take a loan for himself, financial organizations will calculate the amount of a new loan taking into account this debt.
In the credit history of the guarantor, someone else's loan or loan is not reflected. But only while the borrower regularly makes payments. If the borrower stops paying off the loan, then the obligations pass to the guarantor — and the debt appears in his credit history.
Does the co-borrower and the guarantor have the right to the property purchased on credit?
By default, neither the co-borrower nor the guarantor become the owners of the property that was bought with credit money. They have the right to own an apartment, car or other item only if they, together with the borrower, are listed as buyers in the purchase and sale agreement.
Automatically, only spouses become owners. For example, when they take out a mortgage, the purchased housing is considered their jointly acquired property, unless a prenuptial agreement with other conditions has been concluded.
In other cases, the co-borrower and the guarantor may conclude an agreement on mutual obligations with the main borrower. In such an agreement, it can be prescribed that the co-borrower (guarantor) will become the owner of the property for the purchase of which a loan or loan was issued if he is forced to pay the debt instead of the borrower.
In addition, if the borrower and the co-borrower initially intend to pay the loan equally, they can immediately issue equal ownership rights to the property.
What information on the loan is available to the co-borrower and the guarantor?
The co-borrower has the right to receive a payment schedule, information on the amount of current debt, as well as data on payments already made.
The loan agreement specifies how the bank provides the co-borrower with this information. As a rule, detailed information about the loan is available in the mobile application and the co-borrower's personal account on the bank's website.
The bank is not obliged to tell the guarantor about the amount of outstanding debt, payments made or upcoming payments, as long as the borrower deposits money according to the schedule. The Bank begins to inform the guarantor only if the borrower stops paying and the responsibility for debt repayment passes to the guarantor. However, some banks include the right of the guarantor to access this information in the guarantee agreement, loan agreement or banking rules.
Is the responsibility for late payments the same?
If the main borrower does not make payments on time, then the obligation to repay the debt in any case passes to the co-borrower or guarantor. But with different speeds and different consequences.
The co-borrower can immediately find out that the payment is overdue. This information is easy to check through an online bank or a mobile application. Within 7 days, the bank will additionally send him an SMS message, a push notification or an email about this - a specific method is prescribed in the loan agreement.
Information about the delay is reflected in the co-borrower's credit history. Therefore, it is in his interest to immediately make the next payment on the loan, otherwise in the future it will be more difficult for him to get a loan himself.
The guarantor does not always find out about delays immediately. Usually only after the bank presents him with a demand to make the next payment for the borrower and pay a fine for delay. As a rule, the surety agreement sets the period during which the surety must transfer the money. The countdown starts from the moment when he receives the bank's request.
If the guarantor fulfills this requirement within the time limits that the bank has set for him, the borrower's delinquency will not affect his credit history. But if he does not deposit the money on time, it will already be considered his own delay — and will spoil his credit image. In addition, fines are usually prescribed in the guarantee agreement — in case the guarantor does not deposit the money on time.
If the co-borrower or the guarantor does not begin to repay the borrower's debt voluntarily, the bank may apply to the court.
If the loan is not returned after the court decision, bailiffs have the right to seize the accounts and deposits of the co-borrower or the guarantor. In cases where there is not enough money to repay the debt, bailiffs can auction off the property of the co-borrower or the guarantor to repay the debt to the bank.
Is it possible to change the terms of the contract?
The co-borrower can change the terms of the loan agreement, but only with the consent of the main borrower. For example, he can apply to the bank with a request to extend the loan term and reduce monthly payments — to restructure the loan. Or, on the contrary, repay it ahead of time.
In the case of a mortgage, a co-borrower can arrange a mortgage vacation if he finds himself in a difficult life situation. But when the bank decides whether the case fits the conditions of the holidays, it will assess the total average monthly income of the borrower and co-borrower.
The main risk of the main borrower is that without the consent of the co-borrower, he does not have the right to change the terms of the contract. For example, if the co-borrower does not provide data on his income or is categorically against extending the loan term, the borrower will not be able to extend payments.
The guarantor does not sign the loan agreement and cannot influence its terms. But if the borrower, for example, increases the loan amount, this will not affect the obligations of the guarantor — except in cases when he gives his consent to this and signs a new guarantee agreement.
If the guarantor takes over the payment of the debt (voluntarily or by a court decision), he will be able to discuss its terms with the bank. Perhaps the bank will agree to the restructuring of the loan.
What is the difference between a co-borrower and a guarantor?
A co—borrower is the same borrower. He has the same rights and obligations as if he himself took out a loan. Even when you are persuaded to sign a contract only "for show" and you will not use the loan money, you bear a great responsibility. If the main borrower for some reason will not be able to pay the loan on time, the money will have to be paid by the co-borrower.
The guarantor vouches for the borrower — guarantees the bank that the loan will be returned within the agreed period. The guarantor is not obliged to monitor the borrower's payment schedule. If he is late with the payment for a couple of days, the guarantor is in no danger. But if the delay is serious, the bank will make demands to the guarantor — and then the debt will be reflected in his credit history.
On large loans, both co-borrowers and guarantors can be attracted at the same time. If the borrower stops paying, the co-borrower will have to repay the debt. If he also does not make payments, then the guarantor will have to pay.
Let's take a closer look at how the requirements for co-borrowers and guarantors differ, their capabilities and responsibilities.
Usually, the co-borrower must provide the bank with the same set of documents as the borrower: passport, SNILS or INN, marriage certificate, income statement, a certified copy of the employment record. Each bank can have its own set of documents.
Sometimes the list of documents for the borrower and the co-borrower may differ. For example, under the family mortgage program, the main borrower must provide birth certificates of children, and the co-borrower does not need to do this.
In most cases, the guarantor must provide only a passport, a certificate of income and a certified copy of the employment record.
The co—borrower signs the loan agreement together with the borrower, but the guarantor does not. The bank enters into a separate surety agreement with him.
If the loan agreement provides for mandatory registration of insurance, then the co-borrower will have to sign an insurance contract. This is usually not required from the guarantor.
Is it possible to change the loan size and interest rate with the help of guarantors and co-borrowers?
The financial position and credit history of the co-borrower directly affect the terms of the loan. The bank checks the co-borrower in the same way as the borrower: place and work experience, income, financial discipline. The amount of the loan, the percentage and the period for which it is issued may depend on the results of the check.
As a rule, the higher the income of the co-borrower, the greater the amount the bank is willing to lend. If the financial situation of the co-borrower inspires confidence in the bank, then this can lower the interest on the loan.
But the income and credit history of the guarantor almost never affect the parameters of the loan. Most often, the bank simply informs whether such a guarantor is suitable for him or not.
Does the borrower's debt affect the credit history of the co-borrower and the guarantor?
In the co-borrower's credit history, full information on the loan of the main borrower appears, including the payment history. Moreover, the outstanding part of the loan is considered the debt of the co-borrower. If he wants to take a loan for himself, financial organizations will calculate the amount of a new loan taking into account this debt.
In the credit history of the guarantor, someone else's loan or loan is not reflected. But only while the borrower regularly makes payments. If the borrower stops paying off the loan, then the obligations pass to the guarantor — and the debt appears in his credit history.
Does the co-borrower and the guarantor have the right to the property purchased on credit?
By default, neither the co-borrower nor the guarantor become the owners of the property that was bought with credit money. They have the right to own an apartment, car or other item only if they, together with the borrower, are listed as buyers in the purchase and sale agreement.
Automatically, only spouses become owners. For example, when they take out a mortgage, the purchased housing is considered their jointly acquired property, unless a prenuptial agreement with other conditions has been concluded.
In other cases, the co-borrower and the guarantor may conclude an agreement on mutual obligations with the main borrower. In such an agreement, it can be prescribed that the co-borrower (guarantor) will become the owner of the property for the purchase of which a loan or loan was issued if he is forced to pay the debt instead of the borrower.
In addition, if the borrower and the co-borrower initially intend to pay the loan equally, they can immediately issue equal ownership rights to the property.
What information on the loan is available to the co-borrower and the guarantor?
The co-borrower has the right to receive a payment schedule, information on the amount of current debt, as well as data on payments already made.
The loan agreement specifies how the bank provides the co-borrower with this information. As a rule, detailed information about the loan is available in the mobile application and the co-borrower's personal account on the bank's website.
The bank is not obliged to tell the guarantor about the amount of outstanding debt, payments made or upcoming payments, as long as the borrower deposits money according to the schedule. The Bank begins to inform the guarantor only if the borrower stops paying and the responsibility for debt repayment passes to the guarantor. However, some banks include the right of the guarantor to access this information in the guarantee agreement, loan agreement or banking rules.
Is the responsibility for late payments the same?
If the main borrower does not make payments on time, then the obligation to repay the debt in any case passes to the co-borrower or guarantor. But with different speeds and different consequences.
The co-borrower can immediately find out that the payment is overdue. This information is easy to check through an online bank or a mobile application. Within 7 days, the bank will additionally send him an SMS message, a push notification or an email about this - a specific method is prescribed in the loan agreement.
Information about the delay is reflected in the co-borrower's credit history. Therefore, it is in his interest to immediately make the next payment on the loan, otherwise in the future it will be more difficult for him to get a loan himself.
The guarantor does not always find out about delays immediately. Usually only after the bank presents him with a demand to make the next payment for the borrower and pay a fine for delay. As a rule, the surety agreement sets the period during which the surety must transfer the money. The countdown starts from the moment when he receives the bank's request.
If the guarantor fulfills this requirement within the time limits that the bank has set for him, the borrower's delinquency will not affect his credit history. But if he does not deposit the money on time, it will already be considered his own delay — and will spoil his credit image. In addition, fines are usually prescribed in the guarantee agreement — in case the guarantor does not deposit the money on time.
If the co-borrower or the guarantor does not begin to repay the borrower's debt voluntarily, the bank may apply to the court.
If the loan is not returned after the court decision, bailiffs have the right to seize the accounts and deposits of the co-borrower or the guarantor. In cases where there is not enough money to repay the debt, bailiffs can auction off the property of the co-borrower or the guarantor to repay the debt to the bank.
Is it possible to change the terms of the contract?
The co-borrower can change the terms of the loan agreement, but only with the consent of the main borrower. For example, he can apply to the bank with a request to extend the loan term and reduce monthly payments — to restructure the loan. Or, on the contrary, repay it ahead of time.
In the case of a mortgage, a co-borrower can arrange a mortgage vacation if he finds himself in a difficult life situation. But when the bank decides whether the case fits the conditions of the holidays, it will assess the total average monthly income of the borrower and co-borrower.
The main risk of the main borrower is that without the consent of the co-borrower, he does not have the right to change the terms of the contract. For example, if the co-borrower does not provide data on his income or is categorically against extending the loan term, the borrower will not be able to extend payments.
The guarantor does not sign the loan agreement and cannot influence its terms. But if the borrower, for example, increases the loan amount, this will not affect the obligations of the guarantor — except in cases when he gives his consent to this and signs a new guarantee agreement.
If the guarantor takes over the payment of the debt (voluntarily or by a court decision), he will be able to discuss its terms with the bank. Perhaps the bank will agree to the restructuring of the loan.
Is it possible to split the loan and pay only part of the debt?
Theoretically, this is possible. It is easier for guarantors in this regard — they can initially prescribe in the guarantee agreement that they secure responsibility for only part of the debt.
Co-borrowers may try to negotiate with the bank to split the loan between them. But banks are reluctant to do this. It is important for the lender that the entire loan is repaid. And he doesn't care who does it. The more defendants there are, the higher the chances of repaying the debt in full.
Preferential loans are often impossible to divide into several, since they are issued on special conditions and borrowers will no longer meet them individually.
For example, under the family mortgage program, preferential loans can be obtained by families in which a second or subsequent child was born. The bank will not divide such a loan in half between mom and dad — simply because one housing acts as collateral for a mortgage loan and it cannot be divided.
The terms of the loan can be changed by a court decision, then the bank's consent will not be required. But the court rarely makes such decisions. For example, the divorce of co-borrowers will not be a sufficient reason for the court to change the terms of their loan agreement.
At the same time, both the guarantor and the co-borrower have the right to demand that the borrower reimburse them for the costs of paying the debt in full or in part. If it is not possible to agree peacefully, you can go to court.
If I take out a loan, who should I attract — borrowers or guarantors?
It is more profitable for the borrower to attract a co-borrower than a guarantor. After all, if the co-borrower has a good and stable income, there is a chance to get a loan on more favorable terms.
But keep in mind: you will have to coordinate all important decisions on the loan with your co-borrower. And if he is against, for example, mortgage holidays — most likely, you will not be able to take them. Therefore, it is better to hire close relatives with whom you have a common budget and financial interests, or accommodating friends with whom it is easy to negotiate.
If I am asked to become a co-borrower or a guarantor, which status is better to choose?
To begin with, you should generally understand whether you are ready to take responsibility for someone else's debt.
In the case of family members — spouses, parents, children — especially if you have a common budget, it makes sense to act as a co-borrower. Then the terms of the loan or loan may become more profitable.
When someone not so close asks you for a favor, but you are determined to help, the status of a guarantor is safer. Even if a friend is occasionally a little late with payments, it will not spoil your personal credit history and someone else's debt will not prevent you from taking out your own loan.
If you do not want to refuse, but the amount of possible debt scares you, you can become a guarantor only for part of the loan. For example, half or a third of the debt. In this case, the borrower will have to find other guarantors who will also take responsibility for the remainder of the debt. Not all banks agree to share the responsibility for the loan between several guarantors, but finding a more compliant bank is already the borrower's problem.
The bank will conclude a separate agreement with each guarantor. If the borrower suddenly stops paying, you will be obliged to reimburse the lender only your share of the outstanding debt.
Theoretically, this is possible. It is easier for guarantors in this regard — they can initially prescribe in the guarantee agreement that they secure responsibility for only part of the debt.
Co-borrowers may try to negotiate with the bank to split the loan between them. But banks are reluctant to do this. It is important for the lender that the entire loan is repaid. And he doesn't care who does it. The more defendants there are, the higher the chances of repaying the debt in full.
Preferential loans are often impossible to divide into several, since they are issued on special conditions and borrowers will no longer meet them individually.
For example, under the family mortgage program, preferential loans can be obtained by families in which a second or subsequent child was born. The bank will not divide such a loan in half between mom and dad — simply because one housing acts as collateral for a mortgage loan and it cannot be divided.
The terms of the loan can be changed by a court decision, then the bank's consent will not be required. But the court rarely makes such decisions. For example, the divorce of co-borrowers will not be a sufficient reason for the court to change the terms of their loan agreement.
At the same time, both the guarantor and the co-borrower have the right to demand that the borrower reimburse them for the costs of paying the debt in full or in part. If it is not possible to agree peacefully, you can go to court.
If I take out a loan, who should I attract — borrowers or guarantors?
It is more profitable for the borrower to attract a co-borrower than a guarantor. After all, if the co-borrower has a good and stable income, there is a chance to get a loan on more favorable terms.
But keep in mind: you will have to coordinate all important decisions on the loan with your co-borrower. And if he is against, for example, mortgage holidays — most likely, you will not be able to take them. Therefore, it is better to hire close relatives with whom you have a common budget and financial interests, or accommodating friends with whom it is easy to negotiate.
If I am asked to become a co-borrower or a guarantor, which status is better to choose?
To begin with, you should generally understand whether you are ready to take responsibility for someone else's debt.
In the case of family members — spouses, parents, children — especially if you have a common budget, it makes sense to act as a co-borrower. Then the terms of the loan or loan may become more profitable.
When someone not so close asks you for a favor, but you are determined to help, the status of a guarantor is safer. Even if a friend is occasionally a little late with payments, it will not spoil your personal credit history and someone else's debt will not prevent you from taking out your own loan.
If you do not want to refuse, but the amount of possible debt scares you, you can become a guarantor only for part of the loan. For example, half or a third of the debt. In this case, the borrower will have to find other guarantors who will also take responsibility for the remainder of the debt. Not all banks agree to share the responsibility for the loan between several guarantors, but finding a more compliant bank is already the borrower's problem.
The bank will conclude a separate agreement with each guarantor. If the borrower suddenly stops paying, you will be obliged to reimburse the lender only your share of the outstanding debt.