Guarantor Loans

Guarantor loans are the loans in which the borrower can take a loan by producing another individual who stands as a guarantor. These have been created to cater to the financing needs of people who have a very poor credit history. In fact using a guarantor to get guarantor loans can invariably lead to an improvement in the credit scores of the borrower. The lenders will be able to recover the loan amount from the guarantor if the borrower defaults on the repayments. The guarantor on the other hand assures the lender that he would be liable to pay the defaulted amount in case the applicant fails to pay.

Guarantor loans are best suited for people who have a poor credit history and stand a very bleak chance of getting approval for conventional loans. These loans have a loan term of 12 to 36 months and the borrowers can terminate the loans prior to the completion of their term by paying back the principal and interest in advance. The guarantors are the individuals who after to act as a security for the loan. It is the liability of the guarantor to pay back the loan in case the borrower fails to pay back the same. To be a guarantor for a loan, individuals need to first qualify for the same, which implies that the guarantor has be of legal age, has a fixed income and should maintain a clean credit score. Also no financial relationship should exist between the applicant and the guarantor i.e. neither a live in partner or wife are eligible to be guarantor. In case of a violation such a rule, the lending company will black list both the borrower as well as the guarantor.

The guarantors find it really difficult to pay back loans and their own finances are disturbed in case the borrower fails to repay the loan. Thus, it is really important for the guarantor to stand up for genuine borrower only or else they are bound to end up in jeopardy. Bankruptcy or non-payment of loans will lead to a strain in relationship between the guarantor and borrower.

Guarantor loans come with its high risk and this is the reason it is very difficult to find a guarantor for such loans. Until and unless the guarantor knows the borrower personally, they should refrain from such financial commitments. There is enough information available on guarantor loans and a small online research would yield all the information that one would like to know about guarantor loans.