Guarantor Loans in the UK – The Role of the Guarantor
Guarantor loans have become the easiest means of securing instant cash for people with a bad credit history in the UK. These loans are easy to apply for and don’t even require the services of a broker. The guarantor loan companies process the applications for guarantor loans in the UK very quickly and the cash is handed over in a matter of a day or two. However, there is one thing that the borrower needs in order to take out a guarantor loan, a guarantor. The guarantor is the key figure in a guarantor loan and without him you will not be able to secure the loan.
What Does the Guarantor Do?
The guarantor is basically a person who vouches for the borrower and guarantees that he/she would repay the loan amount within the given time period and will keep up with the monthly loan repayments. The guarantor bears the responsibility of repaying the loan himself in case the borrower defaults. Thus, if you have taken out a guarantor loan and then fail to repay it in time then the lender of the loan will go after the guarantor and ask him to repay it. This is the reason why the guarantor is so important when it comes to applying for a guarantor loan.
Who Can be a Guarantor
There are no restrictions regarding who can be a guarantor. Anyone can sign on to become your guarantor except a person who is financially linked to you like your spouse. There are certain criteria that a person needs to meet in order for him to become a guarantor.
- The guarantor must be at least 21 years of age.
- The guarantor must be a UK home owner.
- The guarantor must be financially stable and capable of repaying the loan if the borrower can’t.
- The guarantor must have a good credit history.
Importance of Guarantor’s Credit History
The credit history of the guarantor is pivotal for guarantor loans. If the guarantor has a good credit score then the lender would confident that he will get his money back even if the borrower defaults. Moreover, the guarantor’s credit history also plays an important role in deciding the interest rate applied on your guarantor loan. The better the credit score of the guarantor, the lesser will be the interest rate. So, it is crucial that you find a guarantor who has a high credit score if you want to get the best guarantor loan deal.
Risks for the Guarantor
Considering how the guarantor loans work, the guarantor is the one who has the most to lose. If the borrower fails to repay the loan that he has taken out then it will be the responsibility of the guarantor to repay it. If the guarantor does not have the funds available for repaying the loan then there is a chance that he might have to lose his home in order to pay back the loan amount. One must consider these risks before agreeing to become a guarantor.