If you are experiencing a financial crisis, or need a loan in order to invest into something of importance to you, there is a wide range of loans to choose from. Depending on the amount of the loan, the period over which you want to repay it and the loan’s purpose, you will have a large choice of loans from different banks and financial institutions. In this article, we will deal with a guarantor loan and the reasons why it may be a good choice for you.
What a guarantor loans cover?
Guarantor loans usually cover a repayment period from 12 months to five years. It means that they belong to the group of medium-term loans. In order to be granted a guarantor loan, you need to have another person as a guarantor. That person signs the loan agreement with you and vouches for the full repayment of the debt. If you, for any reason, fail to repay the debt in full, the guarantor is entitled and obliged to repay the debt on your behalf. This can be tricky, because it may not be so easy to find a person to be your guarantor. If you are sure that you will be able to repay your debt and you can find a person to guarantee for you, there are several good reasons to apply for a guarantor loan.
Advantages of borrow through a guarantor loan
First of all, with guarantor loans, low credit rating is not an obstacle. When you apply for other types of loans, such as personal loan, your financial history is observed, and if you have made mistakes and have bad financial history, you are in a way penalized for that by not being granted a loan. This is not the case with guarantor loans, because even if your credit rating is not ideal, you are very likely to be granted a guarantor loan.
Secondly, the money you borrow through a guarantor loan becomes available shortly after the loan is granted. If you and your guarantor have submitted all the necessary documents and you have passed all the relevant checks, the money you have borrowed can become available on your account as soon as in 24h after signing the agreement.
Another advantage of a guarantor loan is that it does need to have a specific purpose, which means that you can invest the money in pretty much anything after you have been granted the loan. Therefore, this kind of loan is often used to repay some old debts, and usually the shortest repayment period is used so that the amount of interest to be paid on the loan is as low as it can be.
Finally, applying for a guarantor loan can help improve your credit rating. Since all other loans require your credit rating to be ideal, it can be very frustrating being rejected only because of the past mistakes. When you take a guarantor loan, if you repay the loan in full within the determined period, and if you pay the installments regularly, your credit rating will be significantly improved. This means that, in future, you will become eligible for applying for other types of loans as well.