Guarantor loans are a popular way of borrowing, as they are often the only way some individuals can be approved for a loan. For example, if a person is struggling to gain approval due to a poor credit history, providing a guarantor could mean the loan is accepted.
A guarantor will reduce the risk to the lender, as they co-sign the loan agreement and become jointly responsible for the loan repayments. The guarantor provides a ‘guarantee’ that they will make loan repayments, if the original borrower fails to make their payments. Due to the financial risks involved, it is important that both parties trust each other and understand the terms and conditions.
In many cases, individuals choose parents, spouses, relatives and close friends to act as guarantors. This is because anyone you choose as a guarantor will be liable for the loan if you are unable to keep up with repayments. So, who you choose to be a guarantor must be someone you can trust and who trusts you. Although, there are some criteria which they must meet.
For example, they will need to show that they have a regular income, financial stability and a good credit history. The guarantor must also ensure that they have read and understood the terms and conditions before agreeing to be co-sign for the loan.
As a broker we can offer a variety of guarantor loans through our panel of lenders. Amounts range from £100 to £5000, with repayment terms of 3 months up to 36 months. Before applying for a loan, it is important to think about the financial implications. Organisations such as Step Change and They Money Advice Service, will be able to offer advice.
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