Guarantor loans can be confusing, particularly because they’re a relatively new form of finance. The first guarantor loans were offered in 2007, and there is a scarcity of information available for those considering taking one out. If you’re planning to take out finance and are considering a guarantor loan, here are some useful tips to help you out.
Make Sure You Can Afford the Repayments
It might sound blindingly obvious, but make sure that you find a loan with an affordable monthly repayment plan. Before choosing your loan, write up a list detailing your current income and outgoings, and then work out how much you have left over to cover repayments (ideally with some more spare for emergencies).
Find a Suitable Guarantor
The most important, and perhaps also the hardest, part of taking out a loan is choosing a suitable guarantor. Your guarantor needs to be a homeowner, aged 18-75, who hasn’t had trouble paying bills in the past. Anyone can play the part, whether they’re your friend, your boss or a relative. It’s important to remember that your guarantor is making a big commitment when they agree to backing your loan; this should not be taken for granted, and it’s a good idea to talk with them beforehand about a situation arising where they have to step in and make a payment. You guarantor will be required to cover loan repayments where you can’t, so it’s important that they can afford the monthly repayments as well as having enough money to live their normal life.
Only Apply for What You Need
Understand exactly what the purpose of your loan is before you take it out, so that you know how much you need to borrow. This may seem obvious, but it is easy to be side-tracked by the thought of borrowing a little extra to have some fun with. Resist any such urges. If you’re buying a car, borrow the exact amount you need. The same restraint should be applied irrespective of the loan’s purpose. Anything extra which you borrow will increase monthly repayments, and the total amount repayable after interest has been factored into the equation.
Make Your Guarantor Aware of their Responsibility
The guarantor must be aware of the part you need them to play and the responsibility it entails. While you won’t intend for the burden of repayments to ever fall on them, if the worst should happen and you cannot afford to pay the money back yourself, the guarantor is fully liable. The lender can choose to pursue one or both of you for the money which remains outstanding, and does not have to exhaust all of its remedies against you before pursuing your guarantor. In simple terms, this means that if you miss a single repayment then the borrower can go straight to your guarantor for payment on your behalf.
Apply Through a Reputable Company
Always look for a reputable brand when applying for a guarantor loan. Ask around to find a highly-recommended company such as 1st Stop Home Loans, or conduct some research online, looking at websites and forums offering feedback and reviews of the services received.
