A Guarantor Loan is a type of Loan that offer people with bad credit the chance to borrow money by using a guarantor.
Taking this type of loan out also provides those individuals with bad credit
the chance to improve their credit score by repaying the loan.
Currently the value of guarantor loans are between 1,000 too 3,000. The length of the agreement is typically between 12 to 36 months but can be repaid early.
A Guarantor is an individual who agrees to take on the existing debt if the borrower fails to meet the repayments. The guarantor needs to be someone who owns their own property, are typically between the ages of 25 and 70 and have a clean credit history. They also need to be employed full time and earning 800 a month. The guarantor can not be the spouse or co-habiting partner of the applicant.
As long as the repayments are made on time there will be very little for the guarantor to do apart from sign the initial documents and pass on the cheque to the applicant. The cheque is sent to the guarantor rather than the applicant as this informs the guarantor that the loan has been completed and more importantly acts as an additional security feature.
During the initial set up, with the consent of the Guarantor a credit search will be carried out to confirm that they are eligible to be a Guarantor. This does not affect the guarantor's credit file unless the applicant fails on the repayments and the guarantor is unable to fulfil the obligations under the guarantee.
It is a big responsibility becoming a Guarantor and the decision to become one should not be taken lightly. It is important the guarantor understands what they are guaranteeing and the finances for whom the Loan is for.