Coborrowers

Coborrowers are individuals who jointly apply for and are legally obligated to repay a loan. In the loan agreement, two or more borrowers sign the contract, agree to repay the debt, and share rights to the financed asset. Coborrowers are typically equal participants in the loan and the asset and are both liable to the lender for the full amount.

Liability and credit impact: Each coborrower is legally responsible for the entire loan, not just a portion. If one borrower misses payments or the loan defaults, both borrowers’ credit reports can reflect the delinquency, and late payments can lower both credit scores. The lender uses the combined income and credit history to assess the loan, which can affect eligibility and terms for all parties.

Distinctions from co-signers: A co-signer or guarantor agrees to repay the loan if the primary borrower defaults but does not usually have ownership rights to the asset or responsibility for the loan terms beyond repayment assurance. A coborrower, by contrast, is typically an owner of the asset and a principal borrower in the loan.

Common contexts: Coborrowers appear in mortgages, auto loans, and certain private student loans or personal loans, especially when two or more people intend to own the asset jointly or share repayment responsibility.

Removal and changes: Releasing a coborrower generally requires a refinance, loan modification, or lender-approved assumption. Not all loans permit removal, and terms vary by lender and loan type. Before agreeing to become a coborrower, parties should understand the long-term financial commitment and potential impact on future borrowing.