Who can be a guarantor for a guarantor loan?

Who can be a guarantor for a guarantor loan?

People are finding it more difficult to obtain unsecured credit in today's economic climate - fact. The reason for this is mainly due to lenders tightening their criteria so that they reduce their exposed risk and can write down their bad debt. The solution for people looking for an unsecured loan is often now to get a guarantor loan.

Applicants looking for a guarantor loan will need to find someone who is willing to back their loan applicant and ready to make repayments if they were to default on a payment in a worst case scenario, this means that more and more people are looking for a friend to act as their Guarantor, but do they know what they are looking for?

Firstly, and let's get this clear, for every lender that exists at the moment, the guarantor must be a homeowner. This does not mean that the loan is secured against their property, it merely gives the lender an extra degree of security - without this, guarantor loan products just wouldn't be feasible. They must also have a reasonably good credit history, and must have a regular source of income - again for the lender's security.

Who the guarantor is, isn't normally as important (as long as there's no direct financial link)....For example a guarantor can be a parent, grandparent, uncle, cousin or a friend. The normal only stipulation is that they are not a partner, living in the same address as the debtor.

It isimperativewhen signing up for the loan that the guarantor understands what it is that they are signing up for. Essentially, they are guaranteeing that the loan will be repaid and will have to cough up the repayments, if the applicant misses payments -In the event that the debtor can no longer make the repayment, it is the responsibility of the guarantor to repay the loan on their behalf.

So why would you want to be a guarantor? In today's economic climate, getting finance is not easy for those that may not be as 'credit worthy' as others. Those that do not own their own home may leave the lenders with little security, meaning that they are less likely to hand out their cash.

As a homeowner, the guarantor gets the opportunity to become a potential 'saviour' for the applicant - Helping a friend or relative that may not be able to get a loan on their own will hopefully make the guarantor feel good! It's always nice to help someone out who needs it.

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