subject: Credit Scoring: Could You Benefit From A Guarantor Loan? [print this page] Rejoice - we have now entered the period of recovery. The economy has returned to growth albeit by the slimmest amount. The recession is finally at an end. The good times are here again, or at least you might think so. Banks continue to tighten the purse strings making sure access to credit remains difficult for many people. If you find yourself in this position what should you do? You know you can afford the payments; the only thing standing in the way is the bank which will not provide the capital to get you started. It's a frustrating problem, but one that many people believe can be solved with a guarantor loan.
As the name implies this is an unsecured loan in which a third party offers security should the debtor be unable to make payments. In theory it should provide ready access for those individuals who find themselves, for a variety of reasons, unable to secure credit.
It can be a great help to see you through a period of financial difficulty or finance a business enterprise. For example, anyone made redundant in the last year might take the opportunity to launch a business for themselves. A guarantor loan can therefore give you the capital you desperately need to get going. Whatever use you find for it, though, it is vital to remember one thing.
What happens if you cannot fail to make repayments? The security of a third party guarantor might persuade lenders to be more generous than might have otherwise been the case. In some cases this might lead some individuals to undertake a greater level of debt than they can comfortably afford. In such circumstances the burden can fall on the third party.
Everyone should carefully think about their options and situation before entering into such an agreement. As useful as a guarantor loan might prove to be, the same rules apply here as with any other type of credit. If, on the other hand, you are the one providing security you should weigh up the financial implications should you be landed with the debt.
Above all, make sure you take good impartial advice. There are a number of companies out there who will help you decide whether a guarantor loan is the right option for you. As long as you follow guidance and avoid borrowing more than you can afford it can provide a way to sidestep the problems of the recession.
