Guarantor loans are a form of loan where a third person, aside from the borrower and lender, is included as a form of security. This is often necessary in cases where the borrower has a bad credit rating or is unsuitable for a typical loan for some other reason. This type of loan gives people who may not typically be able to get a loan, access to the finance they need. The guarantor in these cases acts as security in case the borrower cannot make the scheduled repayments in which case they would be required to ensure payments are made. There are a number of key advantages to this form of loan that could benefit a potential borrower.
Good Credit Is Not A Necessity
It is often difficult to access finance if you do not have a credit score. This is understandable as lenders cannot be sure that you will make the necessary repayments on the loan. In the case of guarantor loans, you do not have to worry about that as long as you have someone with a good credit rating to back your application and assure the lender that the repayments will be made. As long as you are sure that you can make the loan repayments, finding a guarantor could be a great option to allow you to access loans that you may not be able to otherwise.
Everyone Knows What Is Going On
You may worry about the risk of fraud but security and fraud prevention is a key focal point in guarantor lending. Most lenders send the loan amount to the guarantor’s bank account rather than the borrower’s which allows them to double check exactly how much has been borrowed. Lenders will also contact the guarantor in most cases before the loan is issued to go through the full terms.
Guarantors are only required to make repayments as a last resort as lenders will try to retrieve funds from the borrower first and will try to see what else can be done in case of failure to make repayments. This provides reassurance to the guarantor that their money is safe. Guarantors are only necessary during the loan term which could be as little as a year or a year and a half so they also do not have the issue of staying on the books of lenders.
The Process Is Fast And Simple
Although this type of lending requires third party involvement, the process is still quick and simple allowing you to access finance as soon as possible. Most applications are similar to a normal loan with just a little extra information about your nominated guarantor. The guarantor just has to confirm that they agree and then you could access the loan within just a few days.
Despite their bad press, as long as you can make the agreed repayments, guarantor loans could help you when you need them most!