Borrower

Borrower summary: 

  • In finance, a borrower is someone who gets a loan or line of credit from a lender that they agree to pay back. 

  • Borrowers are legally obligated to repay what they owe. If they don't, they can face debt collection actions.

  • When there's more than one borrower on a loan, they're listed as co-borrowers and share equal responsibility for the debt. 

Borrower definition and meaning

In a loan agreement, the party that makes the loan is the lender. The person who receives the loan funds is the borrower. When you borrow, you create a debt. The lender gives you money on the assumption that you'll pay it back. 

You're expected to make on-time payments to your debt: Timely payments can help your credit scores. Missed payments, on the other hand, can trigger collection actions and your credit score can suffer. 

Key concept: A borrower is someone who gets a loan or line of credit.

More on borrower

Loans can help you meet different financial needs. For example, you might get an unsecured personal loan to consolidate debt or use a home equity line of credit (HELOC) to fund home repairs. A HELOC is a credit line that's secured by your home. 

When you apply for and accept a loan or line of credit, you become a borrower. You agree to pay back what you've borrowed, usually with interest. 

Borrower: a comprehensive breakdown

Borrower isn't strictly a finance term—it can apply to any situation where you have the temporary use of something. For example, you're a borrower when you check out books from the library or ask a friend to lend you a pen. You know that you'll eventually have to give back whatever you've borrowed.

The same concept applies to loans and lines of credit. Lenders offer loans because they expect the funds they lend to come back to them over time. In exchange for using a lender's money, the borrower pays interest on the loan. 

Why would someone agree to be a borrower if it costs you money? Borrowing has its benefits. 

  • You can build a positive credit history when you borrow if you repay your loans or lines of credit on time. 

  • A loan can help you pay for unexpected expenses if you don't have a fully funded emergency fund yet. 

  • Loans offer flexibility since you can use them to cover just about any expense. 

  • You might be able to qualify for low interest rates if you have good or excellent credit. 

Here's another benefit: Some loan interest is tax-deductible. If you get a home equity line of credit (HELOC) or home equity loan, for example, and use the loan to fund home improvements or repairs, your loan interest might be tax deductible. Talk to a tax professional about it.

Types of borrowers

Borrowers are usually divided into two main categories: individuals and businesses. As an individual, you might be a borrower of:

Each type of loan is different, but they all create a debt that you have to repay. Your ability to borrow is typically based on your credit scores, income, and other financial factors. 

Lenders might have a minimum credit score requirement they expect borrowers to meet. For example, you might need a FICO® Score of 620 or better to qualify for a HELOC or personal loan. Your credit score tells lenders how risky you are as a borrower and how likely you are to repay what you owe.

If you have a lower credit score, you may need help from a co-borrower to get a loan. A co-borrower is someone who applies for a loan with another person and agrees to share legal responsibility for the debt. For example, a parent who signs off on a student loan with their child is a co-borrower. 

Borrower FAQs

Some personal loan providers focus on borrowers with lower credit scores or income. You can search for those providers online if that's an issue for you.

Another option is to look for secured personal loans, which require collateral. Collateral is something valuable that you offer as a guarantee that you'll repay the loan. It's common to use a savings account as collateral for a secured personal loan. Some lenders will also consider letting you borrow against collectibles, fine art, a vehicle, or other items of value.

Lenders consider secured loans less risky because they can take the collateral if you don't repay your loan.

You could also add a co-borrower with better credit or additional income to strengthen your application. That can help you get approved or get you a better loan. At Achieve, we offer interest-rate discounts if you have a co-applicant—check your eligibility.

If you're comfortable with the internet and with filling out forms, applying for a loan online is faster and easier than calling or driving to a traditional branch. And many online lenders will help you with chat, email, or phone support if you get stuck.

It won't affect your loan decision if you choose an online or in-person process.

You can get a preliminary loan decision in minutes. It takes a few hours to a few days to finalize a loan approval and transfer your money. The exact time depends on the lender's policies, how quickly you respond to requests, and how simple or complicated your situation is. 

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