Loans with guarantor
A guarantor loan or a loan with the aid of a guarantor is really simple to explain. It’s simply a loan that is guarantee by someone with a fairly decent credit history. However, to make it simple to understand, we have produced a guide to the terms of a guarantor loan below.
Guarantee?
Anpther easy one to explain. A guarantee is a promise by the guarantor (in writing) that the applicant who is applying for credit (also known as the borrower or debtor) will adhere to all of the terms and conditions of the written contract, also known as the loan agreement. The guarantee provided by the guarantor means that if the applicant borrowing the money is not able to make any of the payments, then the guarantor will have to step in and make the payments as they are legally obliged to do so. So, the guarantor is a ‘failsafe’ for the banks to ensure they get their loan repaid.
Guarantor?
This is the person who agrees to guarantee the loan will be repaid. Basically, they will be agreeing to repay someone else’s loan and/or debts. Usually the guarantor will be of good character and have a pretty good credit history, certainly a credit profile that the baks will be happy with. The guarantor will have to understand that they will be liable for all of the applicants debt in relation to that particular loan agreement. Banks and other lending institutions will go after the debt and it will be the guarantor that they will pursue, not the applicant.
What is the reason for a guarantee?
A guaranted loan with the aid of a guarantor means that people, particularly young people who have no credit record or very little income, can obtain a loan with a reasonable APR which they previously would not have been able to apply for. As long as the guarantor understands that this is a full, legally binding contract then there should be no problems whatsoever. The applicant and the guarantor should have some form of a relationship, whether it is as friends, relatives or as work colleagues or neighbours.
Loans with guarantors: simple, transparent and easy to administer.
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