If you do not have an excellent credit score and cannot back up a loan with an asset that corresponds to the value of the loan, a guarantor is more than likely your best option. Most loan providers offer this option and applying for a guaranteed loan is a very easy process and possibly one of the safety loans you can apply for. However, there are a few things you need to know about guaranteed loans.
The principle of a guaranteed loan is that the individual who is your guarantor would become responsible for the loans if you were to default on your loan. Becoming a guarantor is an important financial responsibility, and the guarantor usually has to meet a few requirements regarding their income and their credit score.
Most individuals who obtain guaranteed loans use one of their parents or another relative as their guarantor. Becoming the guarantor of someone else's loan is something a lot of people hesitate to do because there is always the possibility that the person who applies for the loan will not be able to keep up with the payments.
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Becoming a guarantor is a legally binding agreement. If the person who borrowed the money default on the loan, the guarantor will not be able to get out of making the payments. The only situation where a guarantor would be able to get out of paying the loan back is if there is a proof that the loan provider breached their side of the agreement, for instance by charging fees that weren't mentioned in the original agreement.
Applying for a guaranteed loan is your best option if you do not meet a few requirements to qualify for a regular loan. This might be the case if you are do not have a good credit score or have a limited credit history. Some loan providers will also require you to find a guarantor if you have a limited work history since there is a risk that you might not keep this job.
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It is important to go over the terms of the loan to understand what the loan provider would consider as defaulting on a loan. Some loan companies will consider that you default on a loan if you miss a certain number of payments while others will consider that you are defaulting once your balance reaches a certain limit. Others will not consider that you are defaulting until you file for bankruptcy.
A guaranteed loan is also an option you should consider because loan companies consider these loans as less risky. Lending money to someone who does not have an extensive work or credit history is considered as taking a risk and the fees and interests charged will usually be fairly high. Using a guarantor can be a good way to reduce the fees and interests associated with your loan.
The hardest part of applying for a guaranteed loan is to find someone who is willing to be your guarantor. Your guarantor will also have to meet a few requirements set by the loan provider. You should contact the loan provider and find out more about their criteria and make sure your guarantor earns enough and has a good credit score. You should also obtain a copy of the terms of the loan with your guarantor to make sure you fully understand every clause.
In the end, a guaranteed loan is a good way to borrow money if you do not have a good credit score or if you have a low income and a limited work history. You should talk to your parents or to other relatives about becoming your guarantor so you can qualify for a loan more easily.