An Easy Guide To How Guarantor Loans Work
Borrowing money can be difficult at the best of times
, however since the credit crunch the banks have become stricter and with their new lending rules, it has never been so difficult to get a loan. It is even harder for people with bad credit or no credit history to find a bank that would be able to help them.
There are very few loan solutions for people who have adverse credit or no credit history, the banks will immediately put them into the high risk category. For individuals looking to borrow money and have never borrowed before, it can be very difficult for the bank to assess them because they have no credit history, even if they are in steady employment and are earning a good income the banks just don't have the proof that they will repay the loan each month.
There is an option for people who have found themselves in this situation and that is with a guarantor loan. This type of loan will require a person of good credit standing to act as a guarantor for the loan. Anybody that has good credit can become a guarantor for the loan, although most people ask a family member or close friend for help, it is possible to ask a work colleague if you have no other options.
It is essential that the guarantor understands the exact role he or she will be taking on with a guarantor loan. They need to know about the risks involved; for instance - if the borrower defaults on the loan it will be the guarantor's responsibility to pay back the loan in full. It would be sensible for the guarantor to ask for access to the borrowers finances bank account, monthly income and to know that he or she are in steady employment, that way the guarantor will know whether he or she can afford to pay back the loan.
The guarantor loan is an unsecured loan and many people think these loans are costly, however the loan is based on the guarantors good credit rather then the applicants which means they are less expensive then most people think they are. If the borrower pays back the loan on time he or she can use their guarantor's good credit score to improve their own.
It is a big worry for guarantors that if the borrower defaults on the loan, that they could lose their valuable possessions like their home for instance. In most cases the guarantor will not need to worry about their collateral because this is an unsecured loan. However if the borrower cannot pay back the loan and no other payments are made, the creditor could decide to take it to court and turn it into a secured loan. This would only be done as a last resort if no other arrangements could be made for payment between the borrower and the guarantor.
Closing Comments
The guarantor loan has become massively popular for people trying to restore or gain a credit history. To get the best deal, search guarantor loans online.
by: Steve Smith
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