There are some crucial things that you need to think about before taking out a guarantor loan so that you can get the best deal possible. Each year thousands of people get these loans, but not all of them do their homework beforehand. You will find that the more information you get on these loans, the better prepared you will be. A guarantor loan can be a great borrowing option for a lot of people, but it’s still important to do your research.
1. Not all Guarantor loans are created equal
Despite what you might believe, not all guarantor loans are the same. It is important that you spend some time comparing different loans so you will be able to find the one that best matches your needs. Loans that have a guarantor who agrees to pay the loan in full if the primary borrower cannot tend to have the best interest rates. It is still important that you do your research and compare loan deals apples to apples though.
2. Loans guaranteed with homes can be taken by the lender in the event of non-payment
You will also need to remember that loans that are guaranteed with homes can and will be taken by the lender if neither the borrower nor the guarantor are able to pay back the loan in full. The proceeds of the sale will be given to the homeowner, but only after the loan has been repaid in full. You will also have to pay any and all penalty fees before you will see a dime of the money from the same. A lot of people who get guarantor loans do not know this, and it’s certainly a crucial thing to keep in mind before applying.
3. Starting with a Lower Repayment Period is a good idea
It’s always a good idea to start with a lower repayment period or a lower value when it comes to getting a guarantor loan. Many people tend to get a £5,000 loan with a five year payback period rather than opting for a shorter timeframe, which can be a big mistake. While you may not have quite as long to pay back your loan with a shorter payback period, you will also end up spending less on interest overall. The longer your payback period is, the higher your interest rate is going to be.
4. Paying off your loan as agreed is especially important if you have bad credit
It is particularly important for you to pay off the guarantor loan that you take out according to all of the terms and conditions of the contract if you have bad credit. If you are trying to get your score up to a respectable number, you will definitely need to make a point of paying back the money you have borrowed on time and in full. Failing to pay back your loan according to the agreed upon terms will result in further damage to your credit, which can be crippling in a number of ways.
5. A Guarantor must have good Credit
The person that you get to be your Guarantor must have good or preferably great credit, because otherwise your application will likely get rejected. While your relationship to the guarantor doesn’t really matter at all, their credit and income are the two things that will really count. The better the guarantor’s credit is, the lower your interest rate is going to be. This is why it’s so incredibly important that you take the time to find the right person to fill this role before applying for a loan.
Conclusion
A guarantor loan can certainly be an excellent option for many people who have bad credit but need a significant amount of money for some type of expense. You will of course need to spend a decent amount of time comparing loans from various lenders so you can get the very best deal overall. The more time you invest in doing this research, the better of a deal you’ll get on the loan you need. The information in this article could save you hundreds of dollars on your next loan.
