First of all let’s start with what a guarantor loan is. A guarantor loan is something which is done when a person has bad credit history. If a person who comes to a bank and asks for a loan gets declined, but they really need the money right now and their family or friends don’t have enough to borrow them, the only way they can get a loan is by signing a guarantor loan.
Guarantor loan works like this. You find a family member, friend or even a colleague who has a good credit record and ask them to become your guarantor. If that person agrees, that means that you can go to a bank and present this person as your guarantor. A guarantor guarantees that you will pay back the loan. Should you fail to pay the loan, everything you borrowed falls on that person to pay it for you.
Guarantor loans require from a guarantor to be over 21 years old and to have a good credit history.
These loans usually expect you to bring money back in one to five years and normally don’t exceed 10 thousand dollars.
But as the title stands, what does it really mean to be a guarantor and what you should expect?
Being a guarantor is very risky. Should a person who you’re guaranteeing for fails to pay the money back, that burden falls on you and you alone. The most important thing to do before becoming a guarantor is to properly inform yourself about everything there is to know.
Here are a few of the things you need to consider before becoming a guarantor.
- First of all, why does this certain person needs a guarantor for in the first place. How come they have poor credit history and will they be able to pay back the money the borrowed.
- Secondly, how responsible is the person who is asking you to become a guarantor. Are they responsible enough to take this seriously and not cause you any problems down the road.
- Also, how important is this loan to a person who is asking you to become a guarantor. Is it something they really need or is it maybe something they could simply save money for, for some period of time.
- The important thing to remember is, being a guarantor doesn’t only mean you will be paying back the original loan, it also requires you to pay back the interest rate. So the question you should ask yourself is will you be able to pay it all back if a person who you’re guaranteeing for can’t or won’t.
- Being a guarantor is a very serious business and you might even be asked to name something as a security should you fail to repay the debt.
After thinking about everything that we’ve mentioned above and most of all about the person who you’re about to guarantee for and you’re still in doubt. The best course of action would be to seek legal advice.