What is a co-maker?
A co-maker is a person who is legally required to pay for a loan and related fees if the borrower fails to do so.
Lending companies sometimes require loan applicants to have a co-maker with good credit and financial standing. This assures the lender that the loan will be paid no matter what happens.
While not all loans require a co-maker, lenders may ask for one before giving approval.
Is it good or bad?
As a borrower, having a co-maker in your loan application can be necessary. The challenge is finding someone willing and able to pay the charges in case you won’t be able to.
On the other hand, being a co-maker is quite a huge obligation. Depending on the lending company’s terms, that may mean that you are liable for the debt the moment the borrower fails to pay. So before signing any legal document, make sure you fully understand what you’re getting into.
For the lender, requiring a co-maker can lessen the risk of unpaid loans.
What it means for you
The loan process requires a lot of trust for everyone involved. Having a co-maker gives the lender more reason to trust the borrower, and so more reason to approve the loan.
On top of legal implications, a co-maker agreement can also affect personal relationships. Remember to think of the whole picture before asking someone to be a co-maker or saying yes to being one.
Frequently asked questions about co-makers
1. Who can be a co maker?
Co-maker requirements vary per lender. Some could require you to choose either a blood relative, an in-law, or your spouse. Others may allow you to have a non-blood related friend as a co-maker.
Your co-maker may also need to have a good credit score and employment history.
2. What is the difference between a co-maker and a guarantor?
Co-makers may be held liable for the loan the moment the borrower misses a payment. On the other hand, a guarantor is only obligated to pay the debt after the lender has tried all legal options to collect payment from the borrower.
