All lending institutions render eligibility criteria for determining which borrower can manage loan payments and which can’t. Some such criteria include income, minimum age for qualifying for a loan, employment details, monthly income and credit history. In case you’re not able to meet either one, or few or all of the aforementioned criteria, you won’t qualify for a personal loan. But hey, that doesn’t mean that you won’t be able to ever get a loan for meeting some financial purpose. You may consider getting a family member to guarantee the loan on your behalf.
In case you don’t know what guaranteeing a loan means, here are few facts that you should know before taking the plunge.
Guaranteeing a loan – What does that mean?
Whenever you ask a family friend to guarantee the loan which you’re taking out, you will ask them to take debt on your behalf. In case you tend to become a guarantor on a person’s loan, you actually become legally liable for the debt in case they fail to make payments on time. In case you’re a guarantor and you apply for personal loans with guarantor on your own, you’ll have to guarantee the application. You might even require putting some collateral to guarantee the loan, like for instance equity in your car or home and you won’t be able to use the asset as collateral for taking out your own personal loan.
Which personal loans permit the use of a guarantor?
There are several loans which allow the use of a guarantor and if you want to determine your eligibility, it is indeed a good idea to compare loans and have a talk with your bank. All personal loans can’t be a ‘guarantor’ personal loan and using a guarantor is nothing but a viable option to obtain a loan when they’re not able to borrow with their own merits. The following loans can come in form of guarantor loans.
- Secured loans: If you’re looking forward to buying a car or you and you think your guarantor has got an asset which can be used as collateral, you can opt for secured loan. They have lower rates than unsecured loan since there is reduced risk for the lender. The guarantor takes on additional risk if they offer collateral.
- Overdrafts: An overdraft is given along with a transaction account and allows you to withdraw specific credit limit. This is revolving line of credit and hence there isn’t any repayment term.
- Unsecured loans: With an unsecured personal loan, more flexibility is provided and neither you nor the guarantor requires offering anything as an asset. Fixed rates and variable rates are given for periods which are in between 1 and 7 years.
Therefore, if you’re wondering about personal guarantor loans, make sure you take into account the above mentioned details. It is always better to set a guarantor