subject: The Typical Guarantor Criteria [print this page] Although potentially the most popular use of a guarantor is in a loan application, there are other credit commitments that may require the support of a third party individual. One of these is rented properties; sometimes if the applicant has very little credit history the landlord will ask them to provide a guarantor. There are also specialist bad credit mortgages that use the guarantor as a way of reducing the risk of lending to those with a low credit score. For now though, well discuss the role and responsibility of the guarantor in a loan application.
Guarantor loans gained their popularity due to being able to help those who have previously been refused credit elsewhere, all at affordable rates. Previously the only viable option was doorstep lenders however these have recently declined in popularity due to their high interest rates. The main reason guarantor loan lenders are able to offer their loan products at reasonable rates is because of the support of the guarantor.
On signing their agreement, the guarantor promises to pay the repayment if the borrower ever fails to do so. This means that effectively; providing the applicant and guarantor stick to their agreements the lender will always get the repayments one way or another. As a guarantor the only time you would ever be contacted is if the borrower misses a payment and the loan falls into arrears; providing the applicant meets each of the scheduled repayments on time; the guarantor will never be contacted.
Typically, the lender will require the guarantor to be a homeowner; whether they are paying a mortgage on the property or own the home outright. The guarantor will also be required to have a good credit history and be receiving an income that the lender deems to be sufficient. In order to confirm that the guarantor has good credit lenders will carry out a credit search. They will also use an affordability check to confirm that their income is sufficient.
Contrary to popular belief, the reason lenders require the guarantor to be homeowner is because they require proof that they have been able to manage a large credit commitment in the past - not to secure the loan against their property.
You can only be guarantor for
one loan with one company therefore you are unable to guarantee two loans from the same lender, you can however guarantee two loans for two different lenders.
