If you have bad credit, or a low credit score due to a past history of bad credit, and need a loan, one option to get a loan are guarantor loans.
Guarantor loans work this way:
- You have bad credit
- You need a loan
- The bank or lender asks for a guarantor
- You know a family member or good friend that has good credit
- The family member or good friend sign as a guarantor for the loan
Think of a guarantor as a co-signer, a joint loan.
Should you default on the loan, the guarantor is then liable and expected to make the monthly payments.
Sounds intriguing, and have more questions?
Let’s explore both sides of the coin.
I Need a Guarantor For a Loan
This can be someone who may have bad credit, and had credit issues in the past, or even someone with no credit history.
They have applied for a loan, and the lender has requested based on the applicants credit score or credit history, they will require a guarantor to grant the loan.
The applicant then has a few choices:
- Find someone they know, a family member or a close friend to sign as guarantor for the loan.
- Decide they do not need the loan, and seek alternate financial means.
- Discuss other options with the lender.
I am a Guarantor For a Loan
If someone asks you to be a guarantor for a loan, there are a few questions you need to ask yourself:
- Am I sure they will repay the loan?
- Can I afford to pay the loan if they default?
- Why do they need a guarantor?
- Are there alternative means to financially help them?
As a guarantor you are just as responsible for the loan as the borrower. So should they default, the lender will look to you for payments.
It is a responsibility not to be entered into lightly.