3 Steps to Finding The Perfect Loan Guarantor

If you have had bad credit in the past, or even if you have never had credit, you know getting a loan, especially a loan when you really need one, can be problematic.

If you have had bad credit in the past, or even if you have never had credit, you know getting a loan, especially a loan when you really need one, can be problematic.

That is why there are loans for people with bad or no credit, they are called bad credit loans. And the major difference between these types of loans and other loans is that bad credit loans do not use credit scoring or credit history as a basis to grant the loan.

3 Steps to Finding The Perfect Loan Guarantor

These loans are based on affordability, and depending on the type of loan, one other criteria.

In the example of a payday loan, the other criteria is you have a job and are working and earning a wage.

For logbook loans it is that you have a car of value.

And for guarantor loans, it is that you have a guarantor.

A guarantor is someone who states they will pay the loan should you as a borrower miss a payment or default on the loan. Having a guarantor strengthens the whole loan process, and reduces any risk the lender of the loan may have.

Anything that reduces the risk on a loan, is good for all parties involved. The lender is more likely to approve the loan, and the borrower receives a fair interest rate.

The crux of a guarantor loan is the guarantor, in addition to affordability; the borrower being able to repay the loan.

With this being stated, and being the obvious, if you are seeking a guarantor loan due to having bad credit or no credit, you need to secure a guarantor.

And this is usually best done before you apply for the loan.

Having a guarantor lined up, ready to go, insures the process will flow smoothly, and quickly. And after all, who wants to wait for a decision on a loan.

So let’s look at finding the perfect guarantor for your loan.

Someone You Know

Chances are you already know someone who can be your guarantor.

They may be a close friend, a family member, even a work colleague who knows you.

Just look around, there are people who know you, and would be happy to help you. Of course it may seem awkward at first to ask someone to be a guarantor, so you need to know what is involved, and that way you can explain it to them.

Our Guide to Being a Guarantor, is a great start for you, and for your guarantor. You can read what is expected of a guarantor, and explain it and they can also read it.

So finding a guarantor is not that difficult, but there are a couple of other things you need to know and be aware of.

3 Steps to Finding The Perfect Loan Guarantor

Has OK Credit

Here is where some people get concerned when asking someone to be a guarantor, and some potential guarantors get concerned as well.

They think they need perfect credit to be a guarantor, and/or they think they need to be a homeowner.

As a guarantor, you do not need perfect credit and you do not need to be a homeowner. You just need to be in a financial position to afford to repay the loan should the borrower fail to do so.

So two (2) misconceptions debunked.

It is more about affordability. This does not mean a guarantor can be currently in bankruptcy, or struggling to repay their own bills and accounts. It is more that their credit score meets the target set by the lender, they know the borrower, and should the borrower default, they can afford to repay the loan.

No Financial Ties

One last step to finding the perfect guarantor for your loan is that they have no financial ties with you.

This is not saying a partner or spouse cannot be a guarantor for their partner or spouse, but they cannot have co-signed or guaranteed any other loans that are currently outstanding at the time.

If your guarantor is your partner or spouse and you both are on a car loan, or other loan together, they cannot be your guarantor, this is a financial tie.

3 Steps to Finding The Perfect Loan Guarantor

For the most part, someone you ask to guarantee a loan for you is not going to have a financial tie with you, but you need to be aware of this.

So now you know the three (3) easy steps to finding the perfect guarantor for your next loan.

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