If you find yourself facing a financial emergency when you have unexpected costs such as medical bills, emergency home repair or car repair costs to think about, it might be worth thinking about taking out a short-term loan such as a payday loan. Kallyss provides payday loans online, even for those with a bad credit history, with an easy application form and you can have the money in your account on the same day as applying or the next business day.
There are a number of different types of loans you may consider, from a $1,000 loan to fast cash advances, being able to borrow the money you need fast can make a big difference to an otherwise tough financial situation.
If you are thinking about taking out any type of loan, you may be asked by your lender to provide and nominate a guarantor for your loan. A guarantor takes responsibility for your loan if you fail to pay; it is most often associated with people with poor credit when they need to take out any form of unsecured finance and whenever they need to borrow money.
What is a Loan Guarantor?
When you have a guarantor on any loan, they will take responsibility for your loan should any problems arise. If you fail to repay your loan to the lender then it will be the responsibility of your guarantor to come up with the money and cover what you have been unable to. This can happen in various forms and usually guarantor’s guarantee the loan by putting their own property on the line as ‘security’ or ‘collateral.’
Therefore, it is possible that if you fail to repay your loan that your guarantor’s house could be repossessed and they as well as you may run into trouble, damaging your credit score as well as theirs. However, there are many stages in between you not repaying your loan on time and repossession of the guarantor’s house.
Your guarantor must be a US citizen who has a strong credit score and it can be anyone including your friends, family or colleague. Having a guarantor gives the lender piece of mind that their money is safe and allows them to offer you a much better rate on your loan, or even offer you the loan in the first place.
What Are The Advantages of a Loan Guarantor?
There are many advantages of having a guarantor for your loan, whether it is a simple $100 loan or something more tailored like an installment loan online. One of the biggest advantages of having a guarantor on any loan is that it can make it potentially much easier for you to secure the loan you are looking for. Lenders understand that they are ultimately, much more likely to be repaid regardless of whether it is you who pays them and therefore are willing to lend higher amounts for longer periods of time.
Key benefits of a guarantor include:
- An increase in your chances for being accepted for a loan application by the lender
- Depending on the credit score of your nominated guarantor, lenders may be willing to offer you a much higher amount for your loan than they would have done otherwise
- Peace of mind for lenders that you are a lower risk lending prospect
- You may be able to borrow larger mounts of money in the form of a loan, with reduced risks to the lenders
This means if you have a large unexpected bill for example, having a guarantor might allow you to get all of the money you wanted rather than having to find another loan or another way to gain the funds. In addition, by being able to borrow money in larger amounts, you may also be able to consolidate your debts, including things like credit cards and veterinary bills, into fewer and more affordable repayments (and into a single loan to be repaid.)
Lastly, having a guarantor can mean that it matters slightly less when it comes to your own credit score in order to secure the loan in the first place. Often people with very bad credit scores will struggle to secure a loan, or it will be the case that the interest on their that they do secure will be extremely high. However, with a guarantor the loan amount may matter a little less to the lender, as they will have more assurances that the loan amount can be recouped and therefore the borrower is less likely to default on their loan repayments. Therefore, a loan guarantor could be the perfect option for you if you have a bad credit score.
What Are the Disadvantages of a Guarantor For a Loan?
There are, however, also some disadvantages of having a guarantor for your loan. These include the fact that if you are not able to pay the loan then it is incumbent on your guarantor to repay the lender in full and the ultimate responsibility will fall on their shoulders. Should the borrower fail to repay and the loan falls on the loan guarantor, this can have an adverse effect on the credit score of the guarantor.
If your guarantor is a friend or family member then your relationship could turn sour if you do not repay the money and they are forced to repay the lender, even to the extent that some or all of their property may repossessed by the lender. You should always think about the alternatives to payday loans and any loan that can be helped by a guarantor in the first place. For example, if friends and family can lend you the money you need rather than acting as your guarantor, this will usually be more preferable, as loans from friends and family tend to be:
- Cheaper, with less or no interest
- More flexible
- More understanding than others
- Easier to arrange, often with less risks
Before you ask anyone; friend, family or otherwise to be your loan guarantor, you should be comfortable enough to open your financial books up to them. Remember though, that the lender might not give you a lower interest just based on the guarantor, particularly if your credit score is extremely low.
What To Consider Before Becoming a Guarantor
If you have been asked by someone to be their guarantor, then there a few things that you might want to consider before you agree. It doesn’t matter whether the person needing a loan guarantor is a family member or a friend, being a guarantor for a loan is a big responsibility and comes with potential risks and complications, both personal and financial. Therefore, before confirming yourself as a guarantor for any loan, be it a small loan or a large loan, always:
- Understand the loan contract completely and make sure that you understand your responsibility as a guarantor of the loan
- Take into consideration the relationship you have with the person and that it might be put under strain by you becoming their guarantor
- Try to make sure both parties visit a financial expert who can explain, in-depth how the system works and what each others responsibilities are
Remember, that should the loan applicant fail to make their repayments and meet their obligations with the lender in question, the responsibility will fall upon the guarantor who will have entered into a legally binding contract and agreement with the lender.