Should you go for a guarantor loan?

In due time, you are bound to contend with the above question especially if you have a poor credit rating and pressed for cash. It is a question that many a people have had to contend with in the past when they are pressed between a rock and a hard place.

A guarantor loan is a form of credit extended by a bank to a bad credit individual where the core requirement is that the borrower present an individual with a good credit rating willing to guarantee the loan and shoulder the responsibility of repaying in case of a default. Ease of approval, faster processing, competitive interest rates, flexibility, no credit checks and the prospects of boosting ones credit score has indeed made guarantor loans quite popular in the UK and beyond. However, should you go for guarantor loans?

Well, when faced with this dilemma, you need to ask yourself whether you really need a guarantor loan or not. Part of the process is to evaluate your needs in tandem with your current and projected finances. The idea is to ascertain whether you are currently and in future be in a position to repay your loan comfortably without straining your finances. Of course, you do not want a situation where you want to strain relationships with your guarantor simply because you didn’t correctly project your finances in terms of loan repayments.

Secondly, if you are financially stable and the only reason you wish to take a loan is to build your credit score from scratch or rebuild it, then by all means go for a guarantor loan. If managed properly, guarantor loans are the best in rebuilding your credit score or even building one from scratch because of their lower interest rates. At all times, ensure that you have a sit down with your intended guarantor, discuss terms of the loans as well as establish commitments to avoid problems in the future. Remember that your guarantor is putting his credibility on the line by being your guarantor and therefore you should work towards ensuring that you don’t break their trust.