How to Find Someone to Sign for a Guarantor Loan
Quite possibly the hardest part of applying for a guarantor loan is getting someone to agree to become your guarantor. Maybe you are sure they will say “yes”, if you ask them, but you are afraid to impose on them and you are uncertain of how the loan will affect your relationship. Before we get into how you determine who to ask to be your guarantor, let’s look more closely at this particular kind of loan.
What Guarantor Loans Are
First of all, let’s cover the details of guarantor loans. This kind of loan involves three parties- a lender (who has the money, a borrower (who needs the money) and a guarantor (who agrees to pay back the money if the borrower defaults).
The typical lending process for a short-term loan (of which guarantor loans fall under) is that the person who needs money applies with the lender for the money. The lender looks at the application details and the financial state of the borrower and decides whether to approve them for the loan or not.
A guarantor loan adds an extra step. If that borrower isn’t sure they can pay back the loan on time or in full, or they are considered a risk by the lender, then the borrower may ask someone else to sign the loan. That signature means that the signer (or guarantor) will become responsible for the loan, but only if the borrower is unable to pay back the loan.
The full responsibility of the loan would then fall on the guarantor. This can be a weighty responsibility to ask of anybody, which is why you can see how it could be difficult to ask someone to take it on.
Finding the Right Guarantor
There are two main factors you need to consider when choosing a guarantor. The first one is that they are someone you trust to meet their financial responsibilities. It needs to be someone you know has a good credit history and a stable job and who has the income to cover the cost of a small, short-term loan.
Secondly, it needs to be a person that you have a close enough relationship with that if you ask them to sign for a loan on your behalf, they are likely to agree. At the same time, you need to be careful about how the loan will affect your relationship with them.
You want the potential guarantor to feel confident enough in your ability to pay back the loan that they believe they will not need to pay anything on your behalf. It can help to show them your plan for repayment. You can give them much of the same information you have to give the lender in your application form. So, details like what your income is every month, what kind of bills you have to pay and how much money you have left over can all help them to make their decision.
Your potential guarantor will likely have some questions for you about the loan, about your ability to repay it and about what their responsibilities will be. They will also want to know why you need them as a guarantor, and you need to have a satisfactory explanation ready for them. You need to be able to assuage their fears about signing for the loan and ensure that they feel confident in taking on this responsibility.
What to Do Once You Have a Guarantor
After you find someone who will agree to guarantee the loan for you and sign on your behalf, you should include that person in the application process. If you are approved for the loan, then you need to be careful with how you use the loan money. Make sure you are not spending it frivolously and that you have a plan for repaying on any guarantor loans you take out.
Keep in mind that the loan is still your responsibility. Yes, the guarantor is required by law to cover the repayment of the loan if you cannot, but that is not a burden you want to put on anyone else, particularly if you have a relationship of some sort with them. If you shirk your loan repayment responsibilities, it can harm your relationship and you can lose a good friend in the process.
Just be sure you do all that you can to repay your guarantor loans on your own, in a timely manner. The guarantor should only have to act as a safeguard.