How Guarantor Loans Work For People With Bad Credit
For people who have a bad credit score or no credit history and need to borrow money it can be a difficult process
. Individuals have found it harder to get a loan especially since the banks have become more stringent about whom they will lend money to. Ever since the credit crunch it can seem virtually impossible to get a loan when you have no credit history, however it is still possible
It is hard for a bank to asses you with no credit history. It would be hard for them to distinguish whether you could repay money borrowed, making you too much of a high risk for them. If this is your situation then there are a options available and one of these options is a guarantor loan.
The guarantor loan is perfect for people with a bad credit score or no credit history as they can obtain the loan with the help of a guarantor. Although most people will use a close family member to act as guarantor for the loan, anybody is able to do this. The individual you decide on would need to have an excellent credit history to act as a guarantor for the loan.
It is imperative the guarantor understands the loan and the position they are 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 a sensible idea for the guarantor to check the borrowers financial situation: 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 mistaken belief that the guarantor loan is more expensive then other unsecured loans, this is untrue because the loan is assessed on the grounds of the guarantors credit history not the person looking to borrow the money.
The guarantor's property is safe if the borrower fails to pay the loan back, this is because it 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.