March 26, 2010
There are Many Benefits to a Guarantor Loan
There are many different types of loans that you can get for a variety of reasons. However, for those individuals that haven’t established any credit history or have faced bad times and now have bad credit getting a loan can be a major challenge. There is a loan, however, that works around those credit issues and does not require you to pay high interest rates. This type of loan, called a guarantor loan, allows you to depend on the credit of someone else in order to get a good loan at a decent interest rate.
In the US this type of loan is called a loan with a co-signer and has been around for quite some time. In the UK, however, guarantor loans are fairly new, but the process is essentially the same. You find a friend or family member with good credit and you ask them to guarantee the loan. In order to qualify for a guarantor loan, the person who shares the loan with you must have good credit, otherwise they will face the same rejection that you do when applying for the loan.
Once you have found a loan, then you need to work out the details. There are two different types of guarantor loans and in some cases you will get to determine which one you go for and in others you won’t (this will depend on what lender that you use). The first type of guarantor loan requires that your guarantor remain responsible for the loan until the loan is entirely paid for. The second type of loan allows for you to take over the loan completely after a certain amount of on time payments. In either case, the payments will be reported on both your credit report and your guarantors credit report as a positive, which will help you to rebuild your credit.
As you have read, there are a lot of good reason to consider a guarantor loan, however that doesn’t mean that you shouldn’t understand the risks to your loan guarantor before you sign on the bottom line. The reason that you need to think about this type of loan is that the person who guarantees the loan is responsible for it as well. If something happens and you can’t pay the bill, they will be responsible for it. What’s more, every time you are late on a payment, it shows up on their credit report as well, so that that into consideration for you accept a guarantor loan.
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