CO-SIGNER VS. CO-BORROWER

If a relative asks you to sign their home loan with them, ask one question before you pick up the pen: am I signing as a co-borrower or as a guarantor?

They sound alike, but they are very different roles.

A co-borrower shares the loan and usually shares the property. Think of siblings who buy a beach house together for the whole family. All of them are named on the title, and all of them are on the hook for the amortization.

A guarantor (what most people call a co-signer) doesn't own anything. Think of parents who sign for their son because his income alone isn't enough to qualify. Only the son and his wife appear on the title. The parents are there to give the bank comfort.

Here's where it gets confusing in the Philippines: people use "co-maker" for both. So don't rely on the label. Read the bank's form.

Under the Civil Code, a plain guarantor can ask the bank to go after the borrower first before coming after him (Art. 2058). A surety can't. A surety is liable jointly and severally with the borrower, which means the bank can go straight to him (Art. 2047). Many bank forms are written so that whoever signs is liable jointly and severally, whatever you call yourself.

What this means in practice:

• The bank will run a credit check on you as if you were the one borrowing.

• You may be asked to put up collateral of your own.

• If the borrower stops paying, banks usually foreclose the property first. But if you have other loans or collateral with the same bank, they may hold those until the defaulted loan is fixed.

• From what we've seen, many banks prefer parents as co-signers. Siblings and business partners tend to pay their own loans first.

Signing for family is an act of love. Just make sure you know exactly what you're signing.