Basics of Guarantor Loans
In the economic crisis, it becomes hard to take a loan especially when you have a poor credit history. It is common to see that people who do not have sufficient security are usually the people most likely to need a loan. For people with a poor credit history guarantor loansare effective as they do not demand any sort of security for the loan such as car or a house. Today, there are many companies available online that offer Guarantor loans even with a bad credit hostory or low credit score.
These companies (usually loan brokers but not always) give out loans on behalf of lenders, and they do not ask for any other security. A Guarantor Loan depends on a number of factors such as the monthly loan repayments, the APR and of course, have any fees been charged and the borrower (the applicant) must be fully aware of this. These guarantors are the ones who are responsible for endorsing the loan and they act as a kind of security for the loan lender. Guarantor loans have a strict set of lending criteria that every borrower and guarantor must adhere to. One of the conditions is that the guarantor needs to be of minimum 23 years of age, be a homeowner and have a fairly clean credit history. The guarantor must also not be party to a debt management plan or an IVA.
With respect to the guarantor’s income, the loan is largely dependent on the borrowers ability to repay the loan BUT the guarantor must also prove that they can afford to take over the monthly repayments of the loan should the need arise and evidence will have to be provided. Hence, the borrower needs to have a Guarantor for a loan that can afford the monthly loan repayments should the situation demand that the guarantor takes over the loan. Because of the various demands of the role of the guarantor, both the borrower and the guarantor need to be absolutely clear about their respective responsibilities in respect of the guarantor loan and understand their legal position in respect of the loan.
Before applying for guarantor loan, you have to make sure that guarantor is able to cover the repayments if the borrower fails to do so; either because they cannot continue with the repayments or because they don’t want to continue repaying the loan. Generally speaking, this does not happen very often as guarantors are credit checked and referenced well before the loan is granted and indeed, paid out. So in summary, a Guarantor Loan is a very effective solution for all parties, not least of all the lender who has a far greater chance of getting their money paid back.
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