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Do I Need a Guarantor or Cosigner for a Personal Loan?

Guarantor vs Co-signer - Differences & Similarities
Sulaiman Abdur-Rahman
Sulaiman Abdur-RahmanUpdated February 15, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Borrowers do not need a guarantor or cosigner for a personal loan, particularly if the borrower has good credit and steady income. Guarantors and cosigners can help borrowers qualify for a loan by sharing the responsibility of making required loan repayments.A consumer with bad credit, insufficient income, or no reportable credit history may need a guarantor or cosigner to qualify for a personal loan. Below, we describe the similarities and differences between guarantors and cosigners.

Is a Guarantor the Same as a Cosigner?

Guarantors and cosigners can be held liable for payment if the primary borrower defaults on a payment obligation. Is a guarantor a cosigner? No, a guarantor is not a cosigner unless a legal contract uses the terms synonymously.The difference between cosigner and guarantor responsibilities is that guarantors may have to provide lenders with annual financial statements, whereas cosigners generally don’t have that obligation.

What Are Guarantors? 

Guarantors are third-party individuals or companies that guarantee the payment of any lease or loan obligation if the lessee or primary borrower fails to make required payments. The guarantor accepts liability and agrees to make any necessary payments if the lessee or borrower defaults.Is a guarantor a cosigner? As mentioned above, a guarantor is not a cosigner unless a legal contract uses the terms synonymously. The responsibilities of a guarantor are not necessarily the same as the responsibilities of a cosigner.

Guarantor vs Co-Borrower

A guarantor is not a co-borrower, but they share some similarities: 
  • Financial liability. A co-borrower receives a loan and agrees to repay it, whereas guarantors receive no funding from the loan but share financial liability on the debt.
  • Affects loan approval odds. A creditworthy co-borrower can help you get approved for a loan if you have bad credit. Likewise, a guarantor can help you get approved for a loan by promising to pay if the borrowers fall short.
  • Parties to the loan. Each co-borrower shares equal ownership of the loan, whereas a guarantor is an additional party to the loan that accepts financial liability.

What Are Cosigners?

Cosigners are third-party individuals who accept equal responsibility with the primary borrower or lessee on contractual payment obligations. A cosigner accepts liability and agrees to make any necessary payments if the lessee or borrower defaults. Cosigners may also inherit personal loan debt if a borrower dies.

Guarantor vs Cosigner: The Similarities

The below table compares cosigner vs. guarantor similarities:
Can help you get approved for loans or lease contracts just like a cosignerCan help you get approved for loan or lease contracts just like a guarantor
Gives a personal guarantee that payment obligations will be honored and accepts liability if you default on required paymentsAccepts liability if you default on required payments

Guarantor vs Cosigner: The Differences

Here are some of the differences between guarantors and cosigners:
Can be a third-party company or individualUsually a third-party individual, not a company
May have to provide quarterly and annual financial statements prepared in accordance with generally accepted accounting principlesMay undergo a consumer credit check to verify creditworthiness
May have to provide statements certifying a healthy liquidity ratio of current assets to current liabilitiesCosigners of a residential or commercial leasing agreement can face eviction and may see their credit scores plunge in the event of a lease payment default
Generally has no right to occupy leased property with the primary tenantMay have a legal right to occupy leased property with the primary tenant

Personal Guarantor vs Cosigner: Pros and Cons 

Here are some of the pros and cons of loan guarantors and cosigners:
Guarantor prosGuarantor consCosigner prosCosigner cons
Can help a borrower qualify for a personal loanMay demand service fee compensation from the borrowerCan help a subprime borrower qualify for a loanThe credit score of a cosigner can drop if the borrower defaults on the loan
Provides a personal guarantee of payment that may cure any borrower defaultMay be contractually prohibited from protesting any payment obligationsCan help a first-time borrower build a credit historyThe liability of cosigning can negatively impact debt-to-income ratio

Qualifications for Guarantors

Guarantors may have to meet the following qualifications:
  • Creditworthy background
  • Sufficient tangible net worth
  • Satisfactory financial statements
  • Substantial business relationship with the primary borrower

Do Guarantors Get Credit Checked?

A lender may conduct a hard pull inquiry into the guarantor’s credit report, particularly if the guarantor is an individual person. Guarantors can help borrowers get approved for loans by having good consumer credit or strong finances as a company. As stated earlier, guarantors can be third-party individuals or companies.

Qualifications for Cosigners

Cosigners may have to meet the following qualifications:

Do Cosigners Get Credit Checked?

Lenders may conduct hard pull inquiries to see whether cosigners have creditworthy profiles before deciding whether to approve or deny the primary borrower’s application. Cosigners with good credit may help subprime borrowers qualify for subprime personal loans.

When Is a Cosigner or a Guarantor a Good Option?

Cosigners or guarantors may be a good option if they can help you qualify for a loan or lease that you need. There are certain benefits and disadvantages of personal loans, including their potential for helping consumers build credit (pro) and their potential to carry high finance charges (con).Consumers with bad credit may have a difficult time getting approved for a loan, and borrowers with good credit will not necessarily qualify for the best interest rates. Having clear options for a cosigner can help primary borrowers get approved for larger loan amounts and better rates of interest compared with applying solo.One of the reasons to consider a personal loan is to consolidate debt. Cosigners or guarantors with excellent credit can help you qualify for a debt consolidation loan with terms that are right for you.

What Happens if a Guarantor or Cosigner Fails to Pay?

Guarantors and cosigners may face negative consequences if they fail to pay a debt, such as:
  • A derogatory mark can appear on their credit report for years
  • Their credit scores may plunge
  • They may face legal action for breach of contract
There’s no difference between cosigner and guarantor liability. When comparing cosigner vs. guarantor responsibilities, each party is expected to make payments if the primary borrower falls short. Failing to pay may lead to negative consequences, as described above.

Personal Loans That Allow You to Use a Cosigner or Guarantor

Some lenders allow you to apply for a personal loan with a cosigner or guarantor. Such lenders may describe the cosigner as a co-applicant or co-maker. Other lenders only accept personal loan applications from consumers applying solo.Here are some lenders who may consider co-applicants for personal loans:Some financial institutions also offer joint personal loans for co-borrowers, which are generally limited to spouses applying for joint funding.

Alternatives to Using a Guarantor or Cosigner

If you can’t find a guarantor or cosigner, here are some alternatives you may consider:

The Takeaway

Cosigners or guarantors with good credit may reduce risk to the lender and make it easier for subprime borrowers to get approved for a consumer lending product. But persuading the right person to vouch for you as a cosigner or guarantor can be easier said than done.Lantern by SoFi can help you find personal loan offers. Just provide basic information about yourself and the loan you need, and Lantern can guide you in the process to apply for a personal loan with the lender of your choice.Compare personal loan interest rates with Lantern.

Frequently Asked Questions

What are the differences between guarantor vs cosigner?
What similarities are between guarantor vs cosigner?
Is a personal guarantor the same thing as a cosigner?
How do you find out if you are a guarantor or cosigner on a debt or a loan?

About the Author

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman writes about personal loans, auto loans, student loans, and other personal finance topics for Lantern. He’s the recipient of more than 10 journalism awards and served as a New Jersey Society of Professional Journalists board member. An alumnus of the Philadelphia-based Temple University, Abdur-Rahman is a strong advocate of the First Amendment and freedom of speech.
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