If you are finding it hard to get an unsecured loan, a guarantor loan might be another option to consider. To apply you’ll need someone who’s willing to act as a guarantor for the duration of your loan.
Agreeing to act as guarantor is a real commitment; it’s not just about providing a reference that you’ll pay. In the event that you miss any of the monthly repayments, your guarantor will be liable for the debt. This is a big responsibility for anyone, so it’s essential that you have someone you are close to as the guarantor on your loan.
But can you name anyone as the guarantor on your loan? Here’s a closer look at the requirements.
What being a guarantor really means
As we mentioned above, becoming a guarantor isn’t something that anyone should do lightly. A guarantor is agreeing to become responsible for the repayment of the loan if you aren’t able to pay the instalments.
Once named, a guarantor can’t withdraw from the loan halfway through; they must remain as the guarantor for the whole duration of the loan. This is why it’s essential to understand from the start that this is not simply red tape, the guarantor is an integral part of the loan.
If you fail to meet the repayments and the guarantor does not pay either, their credit rating will be adversely affected.
How do I pick the right person to be a guarantor?
As being a guarantor carries such a responsibility, it’s highly advisable to pick someone that you trust and have a close relationship with. If you have a problem and aren’t able to meet the repayments, you’ll need to know that your guarantor is genuinely willing to cover the cost.
Your guarantor must not be financially linked to you in any way. So ideally not your husband or wife. As a general rule, your guarantor will normally live at a different address.
Are there any other requirements?
The requirements will vary from one lender to another but there are some general criteria that your guarantor will need to meet.
- Be aged between 18 and 75 (some lenders insist on being over 21)
- Hold a strong credit rating
- Have no history of difficulty paying their bills
Being a homeowner isn’t absolutely essential but will strengthen the case for your guarantor.
The lender will carry out a soft check on your guarantor’s credit history to verify the information they provided. The check is intended to see whether their credit rating is sufficient to act as a guarantor. As it’s only a soft search, no imprint is left on the credit record.
Will you need to talk to my guarantor?
Although you will be the one to make the application in the first place, your guarantor will need to be willing to talk to the broker or the lender on the telephone as part of the process. This is to verify their identify and confirm the information provided about their financial circumstances. In many ways, the credit-worthiness of the guarantor is more important than that of the applicant.
When the loan process is completed, the money will be paid into the guarantor’s account. This is an extra measure against fraud and to ensure that they know exactly what they’ve agreed to. You and the guarantor can make the necessary arrangements to transfer the money, and all communication after that will be with you as the loan applicant.
A guarantor loan can play an important part in rebuilding a damaged credit rating when other types of credit are inaccessible. To find out more about guarantor loans or to apply, call Loans Warehouse on 01923 678 870 today.