When you really want to invest in something and don’t have the funds to do so, the option of taking a loan is indeed a blessing in disguise. Loans are further categorized into various types, which makes it easier for you to choose the type of loan according to your requirements and your available finances and assets. In this post, we’ll be talking about guarantor loans and everything else you need to know before signing up for one. Here we go.
For starters, what is a guarantor loan? It’s like any other loan, where you borrow a certain sum of money and then repay it after a specific period with interest added to the principal amount. But what makes the guarantor loan different? Just one extra aspect – you have to get someone reliable to act as a backup to this loan – and the role of this person doesn’t end right there. This person, who is also known as the guarantor be liable for your debt and will have to pay it in case you aren’t able to.
Eligibility criteria to choose a guarantor:
- First and foremost, you need to find someone who is more than 21 years of age, that’s the bare minimum criteria applicable to a guarantor of a loan.
- The average salary of the person signing up to be your guarantor should have an annual earning of £20,000.
- Someone with a good credit record and a pretty strong current credit standing are always preferred by banks too.
- Also, having a rented or own home is another criteria – this assures the bank that you actually can bear up your personal accommodation expenditure by yourself.
While these are the underlying conditions to be fulfilled by a guarantor, the requirements may vary from lender to lender. So do check up with your bank.
What are the advantages of taking a guarantor loan?
Well, if you don’t have a good credit standing and are already riddled up with a lot of other loans, no bank will agree to give you a loan of your choice. And this is where a guarantor loan works – you can convince someone with a good credit standing to sign up as your guarantor – which will make getting this loan easier for you.
The disadvantage of this loan?