If you have a poor credit history due to being unable to make previous repayments on time, or having not built up a credit score, it can be difficult to convince lenders to loan you money. This is because they have reason to believe that you may not be able to make the full repayments to them on time which is not only risky for them but for you too as you could end up damaging your credit score further.
In these cases lenders may offer you a guarantor loan. A guarantor loan requires you to find someone who will offer to make the loan repayments for you if you are unable to do so for whatever reason. As this person is showing that they trust you to make the repayments it means that lenders are happy to trust you too. Having a guarantor also gives the lender that reassurance that the repayments will be made and will, therefore, be more confident about lending you money.
Your guarantor must be someone who you trust with your financial situation and who has the income to help you if you are unable to make your loan repayments. The lender will check your guarantor’s credit history to ensure that they have a good credit score and are able to help you to make your loan repayments if needed. Other than the application process your guarantor will not be contacted unless you are unable to make a loan repayment.
Finding a guarantor is a great way to secure a loan if you do not have any assets that you can offer as security and are finding it difficult to find a company who will lend to you.
If you have been asked by someone whether you will be their guarantor you must give this a lot of thought as it is an important decision. Even if you trust them enough to believe that they are able to make their repayments you must feel comfortable enough to ask them if you can see their pay slips or bank statements so you are safe in the knowledge that it will be very unlikely that you will have to make a repayment for them. Agreeing to be a guarantor for someone is a fantastic thing to do but should not be entered into lightly.
If you are looking to take out a loan you can use loan comparison company www.Best4Loans.com to find the best loan for you.
By Sasha Davison
18th March 2014
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