There are now a series of guarantor loans available. These allow you to borrow money if you have a poor credit record. However, in order to allow you to have the loan you need to name a guarantor who will pay any loan repayments that you cannot manage. These cam allow you to buy things that you may not normally be able to and so can be very useful. However, you need to find a guarantor and this is a decision you need to make carefully. You need to think about the responsibilities of being a guarantor and pick a person that can live up to this. You also need to consider your relationship with the guarantor and how that might change.
Features of a good guarantor
A guarantor will need to have a good credit rating. The lender will be doing a credit check in order to find out what their credit rating is like. You will find that this will mean that the person will need a regular income and be paying for their bills and debts regularly. They will also need to not have lots of outstanding debt. They should be able to check their own credit rating before you apply for the loan, should you wish to check whether they are likely to get accepted. It can be wise to do this as they can make sure that the information on it is correct and they can get it altered if it is not. It will need to be someone that you know well, as you are unlikely to want to ask someone that you do not know that well to do this sort of favour for you.
Asking family members can be a good idea. We tend to have closer ties with our family and they are more likely to help us as they have a bond with us which we are unlikely to have with friends. However, we will need to make sure that we have family members that have a good credit rating and that will be willing to help us out with a loan like this. You may need to look towards older members of the family but not old enough to be retired unless they have a significant retirement income.
You will need to think about whether you will be prepared to tell them about your financial situation and ask them for help. Some family members will be more sympathetic than others and more willing to help.
It can sometimes feel easier to ask friends for help with financial matters such as this. This is because they are unlikely to be judgemental as they are your friend. They may also be more likely to offer help because they want to be friendly to you. It may be that you have helped them out in the past and they want to repay the favour. Or it could be that they want to help you because they know that you would do the same for them in the future should they need it. The only problem with friends is that we tend to be similar to them and so this could mean that they have financial problems as well and may not be in a position where they can help out.
It is well worth thinking about what might happen if you cannot make a repayment on the loan and your guarantor has to do it for you. With a loan like this it is easy to assume that you will always be able to make the repayments and so there will be no problems. However, it is wise to assume the worst and consider what might happen if you do need help. This might sounds negative, but it is worth being prepared just in case although it is best to keep a positive attitude and hope that you can make the payments.
It can be wise to speak to your guarantor and ask them what they would expect would happen if they are asked to make a repayment on the loan. They might say that is a risk they took when signing up and they will pay it. They might say that they would expect the money to be repaid to them, by you, as soon as possible. They might say that they would want the money back at some point in time, when you have plenty to spare. These are all very different expectations and so it is good to be aware of what expectations they have and then discuss with them what your expectations were. Come up with an agreement so that you both know what will happen if they do have to make a payment or more than one. Think about what you can both afford and base it around that.