Guarantor Loans 101: What You Need To Know

Have you ever heard of guarantor loans? For people who have poor credit, these handy loans are often synonymous with lifesavers. Guarantor loans are loans which are guaranteed by a third party person or company. If you fail to pay the balance, they will pay it for you. In order to be a guarantor, all you need is good credit. This is a very wide category of loans, so it’s best to keep this introduction to the very basics.

• This particular kind of loans come in all forms, and for many different amounts of money. College loans and car loans can be guarantor loans. Guarantors are often called co-signers. As long as you have a co-signer with good credit, it’s a loan with guarantors.
• You can have both secured and unsecured loans while having a guarantor. Unsecured loans don’t have collateral, while secured ones do. Home loans often are secured loans with a guarantor.
• Guarantor loans are taken because they often have lower rates than regular loans. Guarantors have great credit, and will help you fix yours as long as you pay your bills on time. Sometimes, it takes a guarantor to get approved for a loan. The amount that your rate is reduced can vary from loan to loan.
• As a general rule, the better the credit score of the guarantor, the lower the rates will be and the higher the approvals will be. Remember, if you are a cosigner or guarantor on a loan, be careful. If the main signee defaults on the loan, the guarantor’s credit score can be seriously hurt if they cannot pay.
• Guarantor loans are generally used for loans that are for larger amounts of money that are paid over a long period of time. They are not short term loans. These can be anywhere from $7,500 to over $200,000.

Does this sound like the kind of loan that you need? It’s very likely that you will need a guarantor for any major purchase or loan. If you want to be a guarantor, or get a loan with a guarantor, it’s important to make sure that you are ready to take the responsibility of a loan of this size.

Guarantor Loans: Should You Be A Guarantor?

Guarantor loans are very popular for many reasons. They allow people to borrow larger amounts of money, get lower rates, and also get accepted for better loans. Having a guarantor can also be a good way to build credit with your first loan. Getting a guarantor can be difficult for people with bad credit, or no credit at all. If someone asks you if you can offer your credit for a guarantor loan, read these tips before you say “yes.”

• Being a guarantor on a guarantor loan is very risky, especially with people who are known for not paying bills on time. If they default, you are going to be stuck with their bill. They will still get their credit saved if you pay, but you will be out several hundred, or even thousand dollars.
• However, being a guarantor can also help credit. If you can pay off the loan should your signer default, your credit score may increase. It is still going to be mentioned on your credit report.
• Before deciding whether or not to be a cosigner to a loan, ask to see their credit report. As a general rule, it’s not a smart idea to give a loan to someone who has bad credit. If they defaulted on loans where there were no guarantors, then what makes you think they won’t default on a guarantor loan? If the person has no credit, you have even odds of them being responsible. Use your judgment, and use common sense.
• If you are in a financially precarious position but have great credit, don’t risk your FICO score over this.
• Some guarantor loans are done because of loyalty to family or spouses. Mothers who are guarantors for their kids’ first cars, husbands who are guarantors for their wives’ small business needs are common. If this happens to be the reason that you are signing as a guarantor, this can be a great way to show that you care. However, make sure that you are not being manipulated into something that you cannot afford.

The bottom line is that being a guarantor is a lot of responsibility. You cannot expect a person to pay all the payments on a loan, even though the primary signer should. Prepare for the worst and hope for the best if you are a guarantor. It’s better to be safe than sorry.