What Is A Co-Maker? Understand Its Role When Applying For OFW Loan In The Philippines
Life seems to be full of ups and downs. Someone may need money in emergency and head to the bank, which agrees to lend them money only by their eligibility.
In some cases, the borrower may fail to repay the money due to sudden financial failure, physical infirmity to work or even death.
If the default happens to be in the case of an unsecured loan, to ensure the return of its lending, the bank wants someone to be liable apart from the borrower. The borrower then produces a person known to him, who is willing to take up the liability.
What is a Co-Maker?
Co-Maker is a person who, along with the respective principal borrower, signs the contract and gives surety of full payment of the loan. He or she is liable to pay the loan if and only if the principal borrower happens to default. They may also be addressed as ‘co-guarantor.’
Difference between Co-Borrower and Co-Maker
People often tend to get confused between a co-borrower and a co-maker. The main difference is that the co-borrower is benefited from the loan and can contribute in payment of the loan from the start. Whereas, a co-maker is not benefited from the loan and only pays the whole or the remaining amount if the loan taker is unable to pay it.
Why a borrower needs a Co-Maker?
- Unsecured Loan
Unsecured Loans are usually non-collateral, i.e. they don’t require any proof or documentation and security against the loan. But in some cases such as OFW loan in the Philippines, the company or the bank needs some surety that its money would be returned, and that is provided to it by the co-maker.
2. Higher Amount
If the borrower requires a higher amount but is not eligible for it in collateral or non-collateral loan types, then a co-maker’s eligibility can increase it. The co-maker’s liability can aid in getting a loan with ease. 3. Eligibility
If the borrower doesn’t have a secure income or the value of his collateral is low or zero that makes him ineligible for the loan. The borrower can gauge his eligibility taking the help of a personal loan calculator. Having a co-maker not only makes him eligible for it but also increases the value of his collateral.
4. Credit Value
A co-maker assures the borrower regarding the payment of the loan to the lender. This improves his trustworthiness and elevates his credit value. Credit value is then jointly calculated for a prospective loan application.
In case the borrower unable to pay the debt, then having a co-maker prevents the foreclosure of his mortgage. It is a noble gesture to help someone in distress. There is no harm in lending a hand as a co-maker to someone whom the bank has agreed to lend money.
Make sure your needy friend has a good character, reputation, and a sound repayment capacity. See that you do not burn your fingers.