What is a Co-Applicant? Definition & Examples

Article Summary:

A co-applicant is someone who joins you in applying for the loan and is jointly responsible for repaying the debt. There are some advantages to having a co-applicant, such as increased loan amount, better terms, and improved creditworthiness. However, there are also some disadvantages to consider, such as the potential for disagreements and financial troubles if one person falls behind on payments.

If you’re applying for a mortgage or any other financing method, you might have heard about the option to qualify for a joint loan with a co-applicant. But what exactly is a co-applicant? And what role do they play in the application process?

In this article, we’ll provide examples of when they might be useful, as well as the pros and cons of applying for a loan with another individual.

What is a co-applicant?

A co-applicant is an individual who applies for a loan with the primary applicant and shares responsibilities for paying back the borrowed amount. In other words, both individuals enjoy the financial benefits that come along with receiving the loan, but both are also liable for the repayment of it.

This isn’t just limited to personal loans either. A co-applicant can act as a signer for loan consolidation, a car loan, a refinancing loan, or even a mortgage application.

Note: During your loan application process, you may hear a co-applicant referred to as a co-borrower. Technically, a co-applicant only becomes a co-borrower after the lender approves and funds the loan. However, some people use these words interchangeably.

How does the application process work?

If you apply for a loan with a co-applicant, you and the other individual’s credit history and other financial information will be evaluated in the loan underwriting process. So having a co-applicant with a healthy credit history can sometimes help boost your chances of being approved for a loan you might otherwise not qualify for. However, if their credit score is lower than yours, then your odds of loan approval might be hindered.

It’s a good idea to apply for multiple lenders that accept cosigners or co-borrowers and see which one offers the best rate. As we explain below, co-borrowers and cosigners are two different terms. Cosigners just sign as a guarantee for the loan in case it is not paid. Co-borrowers on the other hand actually have a right to the money borrowed. The comparison tool below allows you to filter the best rates available from lenders that accept cosigners.

Note that applying for a loan jointly is similar to applying for a loan on your own. Both you and your co-applicant will need to fill out a standard application by providing your personal and financial information.

Examples of a co-applicant

A co-applicant can be anyone who’s willing to apply for a loan with you and share the responsibility of paying it back. In many cases, this person can be your family member, a close friend, a business partner, or your other half. Whoever they are, they must be someone you trust, as their actions can impact your personal finance goals.

When is a co-applicant a good idea?

Applying for a joint loan can be a good idea if both the primary applicant and the co-applicant can benefit from it in some way. For example, if you and your partner just got married and would like to own a home together, co-applying for a mortgage loan can be advantageous for both of you — assuming that you and your partner both intend on paying off the new home by making payments on time.

Another example is applying for a loan with a business partner to embark on a new business venture. If both of you can afford to make monthly payments, then a joint loan can be a great way to finance your business.

Pros and cons of having a co-applicant

Just like any other financing method, having a co-applicant comes with its upsides and downsides. So make sure to carefully weigh the pros and cons before going through a loan application process with another individual.


Here is a list of the benefits and the drawbacks to consider.

  • Higher loan amount. Having a co-applicant often allows you to qualify for a higher loan amount, mainly because lenders will pool both of your monthly incomes to assess your repayment ability. And if you and your co-applicant both have a stable income, then the loan amount offered to you may be higher than if you were applying solo. This can be especially helpful if you’re looking to finance a large purchase like a home.
  • Higher chances of being approved. Applying for a joint loan can also improve your chances of getting approved, as lenders will see that you have someone else who’s able to help with the repayment process. Of course, it’s important to choose a co-applicant wisely — someone who has a good credit score and who you trust to make timely payments.
  • Lower interest rate. In general, having a co-applicant can help you qualify for a loan with more favorable loan terms and lower interest rates — assuming that the co-applicant has a good or excellent credit score. This is because lenders often see two borrowers as less of a risk than one borrower.
  • Can put a strain on your relationship. Adding a co-applicant can put a strain on your relationship, as you’ll both now be financially responsible for each other. And if you’re not careful, this situation can quickly turn into a financial nightmare. So before choosing a co-applicant, make sure you can trust them fully to repay the loan on time.
  • Potential credit score damage. If you or your co-applicant misses a payment, this means that both of you will likely see damage to your credit score. And negative information can stay on your credit history for up to seven years from the date of the missed payment.
  • Loss of collateral. If one person defaults on the loan, there’s a chance both of you could be penalized for it. For example, let’s say you and your spouse take out a joint loan to finance a house and one of you defaults on the mortgage. This means that both of you are at risk of losing the collateral — in this case, your home.
  • Shared responsibilities. Applying for a joint loan means shared responsibilities in terms of repayment. So if one of you fails to make payments, the other person is on the hook for repaying the remaining amount.

Pro Tip

Make sure you communicate clearly with your co-applicant before applying for a joint loan. It’s important to be on the same page in terms of what you’re borrowing for, how much the total loan amount is, and how you plan to repay the loan.


Does being a co-applicant affect your credit score?

Being a co-applicant itself does not affect your credit score. However, if the other borrower misses or defaults on payments, then this can have a negative long-term effect on your credit score. So be sure that you’re applying with someone who’s financially stable and trustworthy.

Is co-applicant the same as co-signer?

No, a co-applicant is not the same as a co-signer. In a nutshell, a co-applicant is someone who applies for a loan with you and agrees to share the responsibility of repaying the loan. While a cosigner is someone who agrees to be responsible for the loan if you can’t repay it. If you have little to no credit history, most lenders would require you to have a co-signer to be able to qualify for the loan — whether that’s co-signing a mortgage loan or co-signing an auto loan.

In general, co-signers need to have good credit scores (670 or above) or a steady income to help the primary applicant with the application process. However, there is typically no strict requirement in terms of credit scores for co-applicant.

Keep in mind that both co-applicants and co-signers are liable for the loan if you fail to make payments. This means it’s important to make sure you can both afford the monthly payments before committing. If you’re not sure, you can always ask your lender for more information.

Is it better to have a co-signer or co-applicant?

There’s no one-size-fits-all answer to this question as it largely depends on your individual circumstances. For example, if you’re a student who doesn’t have much credit history, having a co-signer can help you qualify for the loan and receive better terms.

However, if you’re planning on purchasing a new home with your spouse and sharing loan repayment responsibilities, then applying for a joint mortgage may make more financial sense for both of you.

Key Takeaways

  • A co-applicant, who may become a co-borrower, is an individual who goes through the loan application process with you and shares responsibilities for repaying the loan.
  • Having a co-applicant can often help increase the total loan amount you qualify for and allow you to receive better loan terms.
  • A co-signer is only responsible for the repayment of the loan if the primary borrower fails to make payments. In other words, a co-signer isn’t liable for monthly payments if the primary borrower is capable of making payments regularly.

Loans with and without a co-applicant

A co-applicant will be equally responsible for your loan, so it’s important that you choose someone who you feel comfortable about making such a major financial commitment with. Once you’ve found the right person, sit down and have an honest conversation about your financial situation and what each of your responsibilities will be. This will help to ensure that everyone is on the same page from the start and help avoid any surprises down the road.

If you’d rather apply for a loan on your own without that potential hassle that may come along with sharing responsibilities with a co-applicant, be sure to compare different lenders and find out what you can prequalify for.

View Article Sources
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  2. Add Co-Applicant — The Official Site of Rio Rancho, NM
  3. Basics of Budgeting — Indiana Secretary of State
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  5. How Much Mortgage Can I Qualify For? — SuperMoney
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  7. Cosigning a Mortgage Loan: Pros and Cons — SuperMoney
  8. Is Getting a Cosigner for Your Auto Loan a Good or Bad Idea? — SuperMoney
  9. Best Personal Loans with a Cosigner | May 2022 — SuperMoney