Guarantor loans usually cover a period from one to five years, which puts them in a group of medium-term loans. They require a guarantor who will vouch for you that you will pay the loan in full, and if you do not do so, they are responsible to repay your debt. It poses a lot of responsibility on both the borrower and the guarantor, but the guarantor loans are still one of the most common types of loans taken by individual entities.
This is because they are granted even to individuals with low credit rating, plus they usually have low interest, which is a large advantage if you consider that the interest money cumulates over the years and can represent a very high expense.
Getting a guarantor loan should not be complicated if you find a person who is willing to be your guarantor and who has a good credit rating. However, it can have certain disadvantages and can pose certain risks upon both the borrower and the guarantor, so before you decide to apply for such a loan, make sure to reconsider all the possible pros, cons and the potential outcomes of such a move.
In order to apply for a guarantor loan, you must be over 18 years of age, be a citizen of the USA and own a bank account in a US bank, through which the repayment installments will be collected. The same conditions need to be fulfilled by the guarantor as well. When applying for the loan, you need to fill in and submit your assets and liability statement, and your guarantor is required to do the same. You may even have a bad credit history when applying for a guarantor loan – but your guarantor must have high credit rating in order for the loan to be granted.
When it comes to choosing a creditor, it can theoretically be practically anyone older than 18 years, a US resident and with good credit rating. However, the most common practice is that a guarantor is a person n close relationship with a borrower, such as a parent, a sibling, a child or a spouse. It is not rare that guarantor is also the borrower’s very close friend.
When you need to choose a guarantor loan, make sure to check the conditions of several banks before making the decision. The most important factors that should affect your decision are the amount of interest you will pay and the amount of the additional charges related to your loan. After considering these conditions with several banks, you should choose the one which seems as the most suitable in terms of the lowest interest rate and the smallest amount of additional costs.
In conclusion, we can say that guarantor loans are suitable for individuals with low credit rating, because they are easy to be granted to such people unlike other types of loans. Additionally, paying out a guarantor loan timely can improve your credit rating immensely after it was paid in full. Also, they are suitable if you are likely to be able to pay them out over the period of several years, and if you are certain that there is someone willing to vouch for you. If you find yourself in these categories, than this type of loan may be the loan you will find suitable.