How does guarantor loan differs from regular ones?

Every now and then we find ourselves in situations where we simply need more money. We might be planning on founding a small business or your home needs an improvement. Where to find those large amounts of money fast? The answer is to go to a bank and ask for a loan. But, what if you get refused? In this article we’re going to see what your options in this case (when a bank says you’re not suitable for getting a loan) are. What does it even mean?

What’s a guarantor loan? How does it differ from the regular ones?

Guarantor LoanFirst of all, there are big differences between regular and guarantor loans. To explain it in simple words, if your bank doesn’t want to give you a regular one you can apply for a guarantor loan. Guarantor loan is often called an insecure loan since the banks give it to the people who’re not exactly in the perfect financial situation. In this case, the one who wants to borrow the money needs to find the guarantor, the person who will co-sign a contract with the bank. It goes like this: if the borrower is not able to repay all his debts, the guarantor must do it for him. It’s now very clear how the guarantor loan differs from the regular ones.

Who can apply for guarantor loans?

We’ll now discuss about the things that banks consider to be very important guidelines for offering someone a guarantor loan instead of the regular one.

Poor credit score. It’s very simple: if in the past you’ve had some loans, credits that you didn’t pay off in the scheduled time frame, you’re going to have the poor credit score and it will make your bank question your responsibility. When asking for a loan, it can also be a problem if you don’t even have the credit history so the bank you’re asking for a loan can’t check out your financial habits. The conclusion is obvious: if you have a poor credit score, you should consider getting a guarantor loan.

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Have you already been refused for a credit? Banks will usually ask you to provide many detailed information about your overall financial history. It means that if you’ve already been refused for a credit, they will again question your ability to pay off your debts.

When you and your bank decide that the best option for you would be getting a guarantor loan, the next step is to find someone to be your guarantor. People usually find someone who they trust the most. It’s usually their best friend or even someone from the family. There’s one thing to remember: a person you’re financially attached to can’t be your guarantor (it’s usually your husband or wife). Again, this step takes time since there’s a lot of risk involved. If something happens and you’re not able to cover your debts your guarantor might find himself in a very difficult situation. So play it safe.

What is a Co-Signer / Guarantor? What Are Their Responsibilities?

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