Those who have never borrowed money before can find it difficult to find a bank that will help them to obtain a loan
. This is because they have no credit history which makes it hard for the Banks to assess the individual to know whether they will pay back the loan. Therefore the individual is put in the high risk category.
People with bad credit history can also find it hard to find a bank or company to help them. Lenders have become a lot more stringent about whom they will lend too. It can be hard for individuals in this situation as it can feel like the world is against them and that obtaining a loan is impossible. There are options available, only a few, but options nonetheless and one of these is a guarantor loan.
To obtain a guarantor loan you would need to find somebody with a good credit history to act as a guarantor for the loan. This can be anybody, be it a family member, close friend or even a work colleague. Guarantor loans are growing in popularity and the majority of people will normally ask a family member to help.
The guarantor loan is an unsecured loan. Even though unsecured loans are more expensive then a secured loan, the applicant applying for the loan does not have to worry about having adverse credit or no credit history at all. This is because the loan is not based on the applicant, the loan and the interest rate will be based on the guarantor's good credit history, meaning the loan should not be more costly than any other unsecured loan.
As with obtaining any loan there are risks involved. The guarantor loan is more risky for the guarantor because if the borrower defaults on the loan, then all responsibility falls on the guarantor to repay it. The borrower must make sure that they have enough funds to repay the loan before thinking about obtaining this loan and the guarantor needs to have full knowledge of the role he or she are about to undertake before signing any contracts or agreements.
The guarantor loan is an unsecured loan which means that if the borrower cannot make the repayments on the loan the guarantor's possessions should be secure. The creditor could however decide to go to court and turn the loan into a secured loan so they can refund the money lost. This would be done as a last resort only if no other arrangements could be made between both parties to pay back the loan.
Final Thoughts
Guarantor loans do come with benefits, they can help people gain a credit history or restore their bad credit. It is vital that when looking to obtain a loan you fully understand everything before signing the agreement. Search online for the best deals on guarantor loans.
