A guarantor loan is a loan where the borrower elects a guarantor to make any repayments that they miss. It is often thought that this will be done by a young person with a poor credit record who will use their parent as a guarantor, there for the borrower is young. However, there are no age restrictions on these types of loan, but it is good to have a good understanding of how they work when you decide whether you want to use this sort of loan or not.
How a guarantor loan works
A guarantor loan is specifically designed for those that have a poor credit record and therefore find it difficult to get a loan. Although payday loans and other smaller loans are available, it is possible that a person may want to borrow a larger sum of money. These guarantor loans will allow them to do this, especially if they need money now. However, they have to find someone with a good credit record that will be willing to make any payments that they cannot afford to make. Often it would be thought that this could perhaps be a young person borrowing who has not had time to build up a good credit record or who has managed to build up debts that they could not pay off and wants to borrow some more money for something significant. However, there is no age limit on the loan and as long as the borrower can find a guarantor then they can apply for the loan.
How to choose your guarantor
It can be quite tricky choosing a guarantor. It must be someone with a good credit record and so this might rule out some of the people that you know. It is worth noting that it will need to be someone with an income and usually who is not self-employed as without a regular and permanent income your credit score will not be so high. As they will have to be prepared to cover repayments for you if you miss any, then it will need to be someone that you know well and that you trust and also that trusts you. You will need to think about your relationship with the person and whether it will stand up to something like this. Often, you will not be able to ask friends for something like this as you will not know them well enough or feel that they will feel like they can help you. They may even be in a similar situation to you with regards to your credit rating. Family tend to be easier to rely on in this situation as they will be more prepared to help you. You may also look to members of the family that are good with their money and therefore more likely to have a good credit record and that could mean older members who have had more time to learn how to handle their money well, who are better paid or who feel like they have some responsibility towards you and are more likely to be willing to help you. However, if they are retired then they may not have enough income to have a good credit score and if they have a dependent family they may not have money available to help you out.
Is it best for young people?
Although it might seem like a guarantor loan is best for young people, there is no age limit on it. It could be that older adults might be struggling, perhaps due to illness or redundancy or because they are struggle to provide for their growing family. It might even be the case that retired people need to use the loan because their pension is not enough to cover some expenses that they have. It is best not to think of a specific loan only being suitable for a certain age group. This is because if you are looking for a loan, you do not want to eliminate a certain type just because you feel your age is not right for it. It could be the perfect loan for you and you want to include it in the list of potential loans when you are doing your research so that you make sure that you find the right one for you.
So, try not to discriminate against a certain loan until you know lots about it. You could find that you will otherwise be assuming that a loan that is suitable for you will not be and it could mean that you will end up with something that is just not right. It would be a shame to do this and therefore make sure that you fully research everything first so that you are sure of what you are getting in to and then you will know which will be the best for you.Read More