What to Consider Before Securing a Guarantor Loan

Guarantor loans are available to almost anyone, as long as you have someone willing to act as a guarantor in place to secure the loan. In the same way that a secured loan uses your house as a security if repayments cannot be made, the guarantor is in place to provide cover.

They are growing in popularity, as anyone who is not a homeowner or in a poor financial situation for any number of reasons can take advantage of them. Before taking out a guarantor loan with TrustTwo, there are a number of considerations you should make to ensure the whole process pans out smoothly.

Other Options

Taking out a loan is often the last resort for a lot of people, and you should assess all the other available options before deciding on a guarantor loan. Depending on what you need the money for, borrowing from friends and family, using a credit card or receiving funding from elsewhere may be a better choice. These options can all have different rates, terms and conditions attached that are more suitable for your financial needs.

Repayments

A guarantor loan requires monthly repayments to be made, otherwise the guarantor will be responsible for them. Depending on the interest rate applied, you will need to work out if you can afford to meet such repayments. Having a stable income in place should mean you will be able to, but if it seems like something of a gamble then finding an alternative financial solution will be better.

A Suitable Guarantor

Anyone with a good credit history who is between the ages of 25 and 74, that isn’t your husband, wife or partner, can act as a guarantor. Of course their permission is required, as they could be taking on a lot of financial responsibility should repayments not be met. Consider a close family member or friend, who you are willing to disclose your financial situation with, and do your best to keep them happy by meeting all repayments.

The Risks

As with borrowing money from anywhere, there are various risks to be aware of. The fact that your guarantor will have to cover the costs should repayments not be met is the main one. Also, your credit score can become even worse if this happens, which will lead to financial troubles in the future as well. Consider all these points before applying for a guarantor loan and deciding if it’s right for you or not.

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