How Guarantor Loans For Work For People With Bad Credit
Having no credit rating can be problematic for anybody when it comes to borrowing money
. With the state of the financial market at present, banks and lending institutions are very wary about whom they will lend money too. This has resulted in changes of their lending criteria and they have become a lot stricter. It can be just as difficult for people with a bad credit rating.
With no credit score the banks have no history to assess you on. They do not know whether you will be good at paying money back, this makes you high risk. There are still options available for people with bad credit or no credit history and that is with a guarantor loan.
A guarantor loan allows people with adverse credit history or no credit history to obtain a loan by using someone to act as a guarantor for the loan. Anyone can act as a guarantor for the loan, a family member, close friend or even a work colleague. The person you ask would need to have a good credit history so they can act as a guarantor for the loan.
The guarantor must make sure that he or she fully understands the role they will be undertaking. They would need to be aware that they are guaranteeing the repayment of the loan if the borrower fails to do so. It would be wise for the guarantor to check the borrower's finances: i.e. income, expenses and to make sure he or she is capable of paying the loan before agreeing to act as a guarantor.
The loan will be in the name of the applicant, if all payments on the loan are made and on time the applicant can build or rebuild their credit rating with help from the guarantor's good credit standing.
The guarantor loan is an unsecured loan. There is a misconception that an unsecured guarantor loan is more costly than other unsecured loans this is not the case because the loan is evaluated on the guarantors good credit not the applicant applying for the loan.
If the borrower defaults on the payments of the loan, the guarantor should not need to worry about their valuable possessions because this loan is an unsecured loan. It has been known for the creditor to take the loan to court and change it into a secured loan to recover funds lost but this would only happen if no other agreements could be reached.
Closing comments
Anybody trying to obtain a guarantor loan will know it is a big risk to ask someone to act as a guarantor for the loan, it must be seriously thought about and you must make certain you can pay back the loan before any decision is made.