Is Important To Investigate Who Can be a Guarantor For a Loan?
So you are someone you know has applied for a loan but their
credit score is too low for them to get a loan on their own. When this happens
there is another option to get a loan and that is to get a guarantor loan. A
guarantor loan is one where another person with a high credit score and a good
credit history is added to the loan as a failsafe in case the borrower defaults
on their loan. In this article, we will focus on who can be a guarantor for a
You may be wondering, if you need a guarantor for a loan, will it make the loan cheaper? Read on to find out more.
Who Can Be A Guarantor?
Who can be a guarantor is controlled by two major things, the law and the lender. In many cases, a spouse cannot be a guarantor of a loan because of how the law deals with debt of married people, but in some cases this is allowed. Beyond the spouse-rule, almost anyone else of age can be a guarantor.
It can be a friend, a family member or just about anyone. Obviously not just anyone is going to be willing to do this for you so typically a family member or a friend will take on this role.
What Are The Conditions of Being a Guarantor?
A guarantor must have good credit themselves to be the guarantor of a loan. This is because without good credit they give the lender very little confidence in the willingness to payback the loan if it is defaulted on. It is a very serious thing to be a guarantor because it means that person is stuck with another person's death if they do not pay. It can end up ruining that person's finances and credit. It is a serious decision to become a guarantor and not something that should be taken on lightly. They should know all that comes with it.
Is it a Good Idea to be a Guarantor?
It depends. It is a very risky position to have for all the
reasons that we have listed. It can be rewarding to help someone you care about
to get a loan and if you trust them and how they will handle their finances it
might be a great idea. It all depends on who you are dealing with, if you can
trust them, if they have the money to pay and if you are willing to take on the
responsibility and risk of owing money on something that isn't even yours.
As you can see there are many conditions to being a guarantor on a loan but just about anyone can take on this position. We spoke about why a person would need a guarantor and about how a guarantor must have good credit themselves in order to guarantee a loan for someone. We gave a warning about what it means to be a guarantor and when and when not to attach your name for someone's loan. At this point, you should know if being a guarantor is right or wrong for you and how to move on from here.
Check out the following video to gain some
insight into what borrowing money from a family member may be like -