Benefits of a Guarantor Loan

1. Benefits of a
Guarantor Loan

2. Credit History
A guarantor is involved in a loan transaction if the banks feel that the borrower has a
questionable credit history or low income. Since the loan is approved based on the
guarantor’s credit rating, a loan default can adversely impact the guarantor’s impeccable
credit history.

3. Financial Burden
If the borrower fails to make repayments on the loan, the guarantor has to step up and
take responsibility for repayments. This can be a financial burden that may affect the
guarantor’s long-term and short-term financial goals.

4. Credit Score
Credit score helps lenders in their lending decisions. The ideal credit score lenders look
for in an applicant is 750 or above. In case the applicant has a low credit score, banks may
ask for a guarantor. A guarantor should be aware of the fact that if the borrower fails to
repay the loan, the credit score of the guarantor and the borrower is affected. This may
make it difficult for both – the borrower and the guarantor – to get loans in the future.

5. Loan Details
The guarantor should try to find all the details about the loan, such as the loan amount,
interest rate, method of interest calculation, EMI amount, and loan tenure. Having this
information is important to stay prepared for possible future concerns.

6. Relationship Between Borrower & Guarantor
By having someone guarantee a loan, should the borrower default, the guarantor is
responsible for payment. This has the potential of placing a strain on the relationship.

7. Responsible Borrowing
While a guarantor loan is processed and underwritten to ensure the borrower can afford
the repayments, the borrower has a responsibility to ensure affordability as well, not
applying for additional loans, or unwise spending causing payments to be missed.

8. Fees
Most guarantor lenders do not charge a fee to apply for a loan. You may wish to shop
around if one does charge a fee.

9. Guarantors As Certifiers
In addition to pledging their assets as collateral against loans, guarantors may also help
individuals land jobs and secure passport documents. In these situations, guarantors
certify that they personally know the applicants and corroborate their identities by
confirming photo IDs.

10. Thank You
Website: https://allegiant.co.uk/guarantor-loan-claims/