Many banks or lending institutions find it difficult to loan money to individuals
who do not have a credit history because they have never borrowed before. Having no credit rating whatsoever can make it difficult for a lender to evaluate an applicant because they do not know whether that person will meet the payments required, it can be just too risky for them. With most loans there are options available one good option would be a guarantor loan.
When looking to obtain an unsecured guarantor loan you would need to find a person with good credit standing to act as a guarantor for the loan. Anybody can do this, however it is normally a family member or a close friend. The guarantor will then vouch for the applicant who is borrowing the loan. It is vital that the applicant and the guarantor both completely understand the roles that they will be undertaking before signing any contract.
To be able to act as a third party for the loan, the guarantor would have to have a good credit history, once the lender has agreed to the loan it can be processed immediately. It will be the guarantor's credit history that will be checked, not the applicant applying for the loan. Providing all the references come back OK the loan should be processed successfully.
Guarantor loans are not only useful for people who do not have a credit history they are great for people who have a bad credit history which they would like to restore. It is very easy for any individual to hit a rough patch and find themselves in financial difficulty and it will almost certainly have an effect on their credit rating. Providing payments are met on time the borrower can build or restore their credit history by using their guarantors credit standing.
Guarantor loans are unsecured which means the individual who is acting as third party for the loan is not at risk of losing their valuables i.e. their home. This helps to offer safety for the guarantor if anything was to go wrong. However the guarantor must take note that if the repayments of the loan are not met, the lender could decide to go to court which means it could be turned into a secured loan, however this would be a last resort if no other arrangement could be made or agreed on.
Closing comments
When looking to obtain any type of loan it is always important to do some research. With a guarantor loan both the applicant and guarantor must understand everything about the arrangements before signing any contract.