Individuals with a bad credit rating do not have high chances of getting approved for a loan but they can still borrow the money they need through a guarantor loan. However, providing a guarantor to the lending institution is not always enough to get the loan approved. Individuals, who are planning to apply for a guarantor loan, will find the below tips helpful to increase their chances of getting approved.
Find a Good Guarantor
A guarantor is nothing but an additional security for a bank. A guarantor basically provide surety to the bank that they will be responsible for the payments in case they primary borrower does not make the required payments. Therefore, it is important that the chosen guarantor has a good credit standing.
As mentioned in the beginning, a guarantor is no guarantee for approval of a loan. Banks want to make sure that the borrower can repay the money in terms of monthly payments. Therefore, it is important that the monthly repayment is kept within 10% of the monthly income to not give any reason for the bank to reject the loan.
Explaining the Risks to the Guarantor
It’s important to thoroughly explain the risks and responsibilities of the borrowing to the guarantor. Usually, the guarantor is a sibling, a friend, parent or another person who is close to the borrower.
Going through a broker to obtain the loan needs additional fees to be paid to the brokerage for the service which is an avoidable expense. Therefore, it’s recommended to go directly to the bank for avoiding such unnecessary expenses.
It is important to shop around in order to get the best rate. Therefore, you should ask for quotes from many different lenders in order to choose the best one. Even if you have bad credit, it is important to shop around and choose a provider that is ready to give the best deal. You can check here at guarantors.co.uk
Be Aware of the Consequences
It’s important to keep in mind that failing to make the monthly payments will have an effect on the credit score of the borrower. While the presence of a guarantor ease the burden when it comes to monthly payments but any issues with the payments will reflect on the credit score of the borrower. Such problems will only add to the already bad credit history which will make it extremely hard for the borrower to get a loan in the future, and they will also find it almost impossible to get a willing guarantor.
It is important to keep the lender and guarantor informed if there are any issues with the monthly payments. It is important to get in front and tell them directly instead of them finding about it from some other source.
Overall, these are only a few tips that potential borrowers should consider while applying for a guarantor loan. Depending on circumstances, they may find better deals at the time. They are advised to thoroughly review the terms of the loan before signing on the dotted line.