Teaming up on a loan could give borrowers more access to credit and better rates than they would qualify for on their own. However, it’s important to understand the responsibilities, too.

Adding another person to your loan can be helpful for many people. Keep reading to discover how that works, what it means to co-borrow or co-sign and when doing so makes the most sense.

How does it work?

By combining resources such as income, credit scores and assets, borrowers can typically access more credit and often get better terms, which also makes it possible for people to get credit approval when they might not be able get it on their own.

What’s the difference?

In many cases a spouse, parent or adult child will be a co-borrower or a co-signer. Either way, signing for a loan means having the loan on your credit report and taking financial responsibility for repayment—but the two roles differ slightly.

Co-borrowing, or a joint loan, allows the additional person to have access to the loan money and they agree to help pay it back. Additionally, they will be named on the loan agreement. It’s very common for spouses to be co-borrowers but anyone could be a co-borrower.

A co-signer allows their credit to be used for the loan application, but they do not have a right to the money. Many people co-sign to help someone qualify for a loan or get a better interest rate. However, if the borrower falls behind on payments or defaults, the co-signer is legally obligated to repay the loan and any fees. If the co-signer pledges collateral for the loan, such as a car or other property, and the borrower defaults, the co-signer could lose their property.

What’s helpful about these scenarios

Borrowers often find it easier to gain credit and get a good rate. A lender considers the income, credit scores and assets of both people to determine their ability to repay a loan. More resources tend to mean less risk of default for the lender.

Always remember, anyone who agrees to be a co-borrower or a co-signer is responsible for repayment. Additionally, the loan could affect their ability to borrow money in the future. Before your put your income, credit and assets on the line, make sure you have a complete picture of the other person’s income, spending habits and overall trustworthiness.

If a joint loan is right for you, check out our personal loans. They are a great option when borrowing because there are no application fees or prepayment penalties.