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Top Tips When Taking Out a Guarantor Loan

Date Added: March 21, 2013 01:35:54 PM



A guarantor loan can be a good thing, providing individuals with the chance to borrow the money they need even with a bad credit. It can be tricky though and even with a guarantor, being approved for a loan is not always sure. For those who are planning to get a guarantor loan, following are some tips to increase the chances.


Get a Good Guarantor

The bank basically looks at the guarantor as an additional security. Should the primary borrower fail with their payments, the guarantor will be the one to follow through. Hence, it’s crucial that the guarantor is someone who has a good credit standing.

Be Wary of Repayments

Even with a guarantor, banks will still make sure that their borrower is capable of paying off the monthly fees. Make sure that the amount falls within 10% of the monthly salary so that the bank will have no qualms about pushing the deal through.

 

Understand the Risks

It’s crucial to let the guarantor know of the risks and responsibilities attached to the borrowing. More often than not, the guarantor can be a parent, a friend, a sibling or some other person close to the borrower.

Apply Directly

Obtaining a loan through a broker could mean having to pay for the service which is an unnecessary expense. Try going directly to a borrower to avoid additional costs.

Screen Lenders Thoroughly

Of course, not just any lender would do. Try asking for a quote from several lenders, allowing you to pick the best ones to send an application to. Even with bad credit, a guarantor should afford the borrower a chance to choose from a variety of providers.

Know the Consequences

Keep in mind that failure to pay will affect one’s credit score. They may not be overly burdened when it comes to payments due to the presence of a guarantor, but it will be definitely reflected on their score. With an already bad credit history, this will only make it harder to obtain a loan next time – plus, finding a willing guarantor may become impossible.

Keep in Touch

Always keep the guarantor and lender informed about problems with payments. They will appreciate it if they information comes from the borrower directly and they may even decide to help.

Of course, those aren’t the only things individuals should keep in mind when getting a guarantor loan. Other deals may rise to the surface, depending on their specific circumstances. The best advise here would be for the individual to review the terms thoroughly before signing anything.