What Are The Responsibilities of a Guarantor?
Depending on what type of loan you’re looking for and where you decide to apply for it, you might need to provide a guarantor in order to be accepted. Many lenders and brokers require applicants to put forth a guarantor to increase their safety when lending to those with lower credit scores or perhaps to those who are requesting larger amounts. This means that everybody is able to access this kind of financial help, no matter their personal circumstances. If the concept weren’t an option, many people would be forced to scramble for cash in emergencies as lenders would have different restrictions barring their acceptance. Therefore, proving the importance of the title. With any loan, repayments are compulsory; therefore, when considering the advantages and disadvantages of becoming a guarantor, it is essential to understand the responsibilities and potential implications that come with the title.
What is a Guarantor?
Typically, a guarantor is a person who guarantees the repayment of a borrower’s debt in the event that the borrower is unable to make loan payments themselves due to any circumstance. Unfortunately, sometimes we never actually know when a financial emergency is going to occur, hence the popularity of payday loans. However, even during the repayment process, our finances may not be stable. Therefore, many people turn to others to help clarify and promise their repayments. If you fit the requirements to be a guarantor, acceptance is likely.
Advantages of a Guarantor
Although being a guarantor comes with many benefits for the primary borrower, the co-signer themselves doesn’t really experience any notable advantages personally besides the ability to help out those around them. Co-signing allows those in need of a loan to apply and increase their chances of acceptance. In most cases, guarantors are not actually used despite being listed in an application. This is because the primary borrower is able to repay the loan on time and in full. However, this can soon change if the borrower loses track of their finances. Therefore, it is essential to ensure you have plenty of trust and knowledge of the primary borrower. This way, it ensures that you are not paying anything unnecessarily or perhaps losing money in the long run.
Disadvantages of a Guarantor
There are many more disadvantages when it comes to being a guarantor, but as mentioned above, they’re unlikely to occur. If the primary borrower is unable to repay the loan, you are legally obliged to repay it. This applies even if you do not have sufficient funds. If you cannot make the necessary repayments, you may find yourself in further financial difficulty. This could lead to an impacted credit score and potential debt.
Borrowing a Loan
Finding a guarantor can be difficult. It is often that many people, whether they are friends or family, will reject the idea of becoming your guarantor. This is usually done to protect their personal finances and credit score. Luckily, here at LoanPig, we offer no guarantor loans which means nobody is required to co-sign the agreement, even if you have bad credit. Learn more here.