Being a Guarantor – Who Can Be One and What It Means
September 21, 2020
Within the last decade, guarantor loans have become popular, even more so than before. It’s all down to how convenient these loans are and they do provide a viable borrowing option. These loans are widely used for those with poor credit and those with very little credit history. Being a guarantor isn’t without risks, however, and if you’re thinking of becoming a guarantor, you need to know the basics. So, what does it mean to be a guarantor and who’ll be eligible to be one?
The Role of a Guarantor
Guarantors assure a bank or lending institute the person actually borrowing the money will repay the loan. You act as a guarantor and you are, essentially, ‘guaranteeing’ the money will be repaid. If the borrowing fails to repay the loan, the burden falls on you the guarantor. So, in simple terms, if the loan has defaulted, the lender will look to the guarantor to repay it. It’s a big ask and you have to understand the risks if your friend or family member defaults. You have to be certain of this responsibility before being a guarantor. Loans with a guarantor can be ideal for borrowers but a major risk for guarantors.
Who Can Act as a Guarantor?
Guarantors must be over the age of twenty-one and have financial security or at least a steady paying job with a fairly good credit history. You can become a guarantor for almost anyone you know or trust; it can be a friend, family member, or work colleague. However, it’s a risk, no matter your age or history with the borrower. Your friend might have every intention of repaying the loan but after a few months and their circumstances change, it might be a very different story. Of course, guarantor loans may help establish someone’s credit and if you trust them, things should run smoothly. For more information, visit: http://www.tammygills.com/guarantor-difference-loan/
Are Loans With a Guarantor Safe For Guarantors Or Borrowers?
This goes back to how trustworthy your friends or family are. For instance, is your friend likely to skip out on the loan? Sometimes, circumstances beyond their control force them into a very difficult financial situation so you have to think. In terms of how safe guarantor loans are, you have to ensure they’re the best possible option available. You need to choose a reputable lender and one that offers a fair rate of interest and a reasonable monthly (or weekly) payment amount. You too need to do your research before you commit to any loan.
The Burden Falls To You
If you have trustworthy friends or family, being a guarantor can be a wonderful thing. You can help someone out in a tight financial spot and may even give their credit a little boost in the process. Of course, that doesn’t mean to say guarantors have an easy time of it as they carry a lot of responsibility on their shoulders. Anything could go wrong and the cost of the loan falls onto you. Loans with a guarantor can be useful as long as you understand your role as a guarantor and responsibilities. To know more click here.