subject: Guarantor Loans - Know The Facts [print this page] The majority of people have felt the effect that the credit crunch has had on the nation, it's been hard for most. It is especially difficult for those who are looking to borrow money, banks and lending institutions are being extra vigilant about lending to individuals. It is especially hard for those who have bad credit or no credit rating at all, lenders will not be able to assess the borrower which means they have no back up to support them in making the decision, banks will not know if the loan will be paid back and so the individual would be classed as high risk.
Whether it's because you have a bad credit history or you have no credit history at all, you can seek help in resolving this situation by getting a guarantor loan. What is a guarantor loan? This is when a person i.e. A close friend, relative or even a work collegue agrees to becomes a guarantor for the loan. This person must have good credit history. It is crucial that the guarantor fully understands the responsibilty of the loan before agreeing to sign any contract.
It is very easy for an individual to get into debt, it could be an unforseen problem, for instance being made redundant which could make it impossible to be able pay off their debts. This can have a bad effect on the the individuals credit rating. When getting a guarantor loan, as long as the borrower repays the loan on time each month they can use the guarantors good credit rating to better their own.
Many believe that a guarantor loan is going to be more costly for them because they have a bad credit history, however they are not normally much more expensive then other unsecured loans. A guarantor loan is not based on the applicants credit history the loan will be based on the credit history of the person who is acting as third party for the loan, which means the interest rate will be decided through the guarantors good credit standing, however an unsecured loan is in general more expensive then a secured loan.
If the borrower fails to meet the repayments on this loan, the guarantor should not have to worry about their valuables because it is an unsecured loan. The guarantor must keep in mind, that if the borrower was failing to meet the monthly payments and no arrangements could be made between the borrower and the lender to get the loan paid off, the lender could take it to court and turn it into a secured loan, however it would be a last resort if no other deal could be made.
Final Thoughts
It is always important to gain knowledge by researching into the loan you are looking to obtain, having an understanding about what the loan entails can help when making the decision. This means you and the guarantor fully understand everything before signing on the dotted line.
