There are all sorts of different loans and it is a good idea to get a good idea of what they all are. This is because if you need to borrow money, it is important for you to make sure that you choose the right sort of loan. There are some pretty well-known ones around but also some newer ones that less people use. It is wise to know about all of them though as a ‘good debt’ is one where you have considered every possibility. Therefore you will need to look at guarantor loans. If they are something that you have not come across before then you will need to find out more about them.
Basics of Guarantor Loans
A guarantor loan is usually for up to £10,000. It is a loan which is designed for borrowers who have a poor credit record and therefore do not have any other borrowing options. There is a catch though, the borrower will need to find a guarantor who will be willing to help them out. The guarantor will have to be prepared to make any repayments that the borrower cannot cover. They will therefore need to have a good credit record and the lender will check this. If they take a repayment from the borrower and the money is not available, they will then go to the guarantor and take the money from them instead.
Who are They For?
So the loans are for those that need to borrow a relatively large sum of money and do not have a good credit record so cannot use other types of loans. However, they will need to be able to find a guarantor that will be able to provide the money for them and will be happy to do so. It is always wise to think hard about a loan though and whether what you are borrowing for is necessary. Although, the lender will not want to know what you are using the money for, you should make sure that it is a good purpose. Think about what you will get out of it and whether you think that it is worth it considering the cost of the loan.
How to Pick a Guarantor?
It is important to think hard about who to pick as a guarantor. Obviously, there will only be a certain amount of people that will be able to do it for you. It will need to be someone that you know well and you know will be willing to support you in this way. You will also need it to be someone that has a good credit score. They will also have to have enough money available to be able to cover the repayments. It is a good idea to have a long chat with them about the fact that there is a chance that they will end up having to repay the whole of the loan because you may not manage it. Although this is unlikely to be something that you expect or want to happen, you will need to make sure that they are prepared just in case. You might worry that this will put them off, but it is better for them to be prepared. You will also need to think about whether they will expect you to repay them for the money that they have paid out for you. Talk to them about it and if they do want repaying discuss when and how they expect this to be done. Then it can be wise to get a written agreement between you so that there will be no arguments about this later.