The Guru's guide guarantor loans
Mother’s Day – the day when offspring are suddenly extra nice to their mums. As a thank you for bringing them into the world, they'll buy them flowers or maybe take them out for dinner. This year, it might be worth going the extra mile, especially if you’re in need of some extra cash.
For anyone looking to take out a loan, but struggling to find a lender due to a bad credit rating, mummy dearest could be the key. Your mum or guardian could really save the day by acting as your loan guarantor. Not sure about guarantor loans and how exactly mum can help out? Fear not – let me drop a mother lode of wisdom on you.
What is a guarantor loan?
A guarantor loan can be an unsecured loan, that requires the borrower to have another person acting as a guarantor. If for any reason you can’t meet your payments, your guarantor will have to step up and pay off your loan. This reduces the risk for the lender, allowing you to get better interest rates than you would normally have been able to. Good times.
Is a guarantor loan right for me?
Guarantor loans are generally a good option if you’ve exhausted other avenues. Maybe you have a poor credit rating that’s affecting your ability to get a loan. In this situation, a guarantor loan would allow you to borrow more.
Who can be your guarantor?
It could be your sweet old mum, but your guarantor can be anyone. Usually it would be a family member or a good friend, but it can’t be anyone financially linked to you, such as your husband or wife. In most cases they will need to be over 21 and will need to have a good credit score and usually need to be a homeowner. They’ll have to go through all the same credit checks that you’d have to. Don’t worry, if you keep up to date with your payments, your guarantor wouldn’t be involved at all – they’ll only need to step in as a last resort if something goes wrong.
How much interest will I pay?
Guarantor loans are like any other loans – the interest you pay depends on a number of factors. These include the lender you’re using and your credit rating. I can totally help you with this bit in my Loans section – seek and you shall find.
What if I’m asked to become a guarantor?
If the sandal’s on the other foot and someone asks you to be a guarantor, congratulations – you must be a trustworthy soul, but beware – there are some things you should consider:
- Is the borrower responsible enough to have a loan?
- Would you be willing and able to pay the loan back if they couldn’t?
- Do they really need that loan?
You might not be able to convince your mum to be your loan guarantor, but this Mother’s Day, try to remember everything she has done for you. Giving you life, for example.
Don’t forget, I’m always here with financial tips, advice and ideas.
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