What is a Guarantor Loan
A guarantor loan is simply a loan that is assessed on the person guaranteeing the loan, ie, the guarantor and not the recipient of the loan.
Here is a simple breakdown:
Miss Smith wants to borrow £4,000 for a loan but she has a terrible credit history that is littered with missed credit card payments, rent arrears and a few defaults. She has no chance of obtaining a loan with her credit history so the only available option would be to apply for a guarantor loan. A guarantor loan is where another individual with a full time job, over the age of 21 and with a very good credit history ‘vouches’ for the loan applicant.
The guarantor has a few responsibilities and the main is that if the borrower defaults on the loan for whatever reason, ie, cannot or will not repay the loan, then the guarantor is the person who will have to repay the loan in full. The guarantor must be fully aware of their responsibilities before agreeing to act as a guarantor.
And finally, the loan repayments are made each month by the applicant, not the guarantor.
