Guarantor loans are a great choice for loan. This is because it does not require people to get a good credit rating performance. Whether you have a bad credit rating or not, guarantor loans can be your loan of choice when it comes to borrowing money. In this page, we list the most frequently asked questions that people ask with regards to guarantor loans.
What is a guarantor loan?
A guarantor loan is a kind of loan that needs a third party to guarantee the loan. This person is called the guarantor. This type of loan is an unsecured loan meaning there is no collateral you can secure the loan against. Simply put, the guarantor acts as a ‘back up’ in case the borrower fails to pay the repayments needed to pay for the loan.
Why is there a need for a guarantor?
Since you are at risk because of your bad credit rating, the company needs someone to prove that you can pay the loan. When there is a guarantor, the company ignores the risk that you have with your score. The guarantor is needed so that in case you fail to make the repayments, the guarantor will be the one who will be the one to catch the repayments. Also, guarantor loan is an unsecured type of loan. It deviates the risk so that people with bad credit performance can borrow money.
Who can be a guarantor?
You can get anyone to be your guarantor, as long as you do not have a financial relation with them such as a spouse. This can be your parents, friends, colleagues, or extended family members. Before listing them as your guarantor, they must know why you need them in this loan situation, and they should be fully aware of the actions that might happen should you fail to make your repayments.
What happens if I fail to repay?
You need to contact the loan company so that you can resolve the issue immediately. You will be accommodated as long as you honestly tell what caused you to miss your repayments. If you still cannot repay, that is the time where the guarantor steps in. The guarantor will be the one charged to pay the repayments. In case both the borrower and the guarantor fail to do the repayments, then a legal action may be taken against both. However, all sorts of reasonable options must be exhausted first before proceeding to legal actions.
Are there any upfront fees?
None. There will be no additional or hidden charges to be made with guarantor loans. Almost all guarantor loans do not have hidden charges to be fair to its customers. If a lending company charges excess fees then that might be a bogus lending company.
How long will the loan be processes?
Usually, loan applications in guarantor loans take only a short while. For some it would only take less than 48 hours to apply and get approved. In some cases once you have accomplished the information needed it can already be decided to be approved in just minutes.