Everything You Should Know
About Guarantor Loans
All youngsters that are just starting their life need a place just for themselves. Unfortunately, it is very difficult to get the necessary funds at an early age, so there is one alternative left: loans. There are several types of loans, but many young people may discover that their credit score is not good enough for the traditional loans from big banks. However, if that is the case for you, you should not lose hope as there is still another option for you.
Guarantor loans appear to be a good solution. Most parents are ready to become a guarantor for their children and offer the equity in their own property. Having a guarantor means that you will definitely get a loan and it is easier if you collaborate with a member of your family. Here is what you should know about these loans.
Co-guarantor is an option
Being a guarantor represents a huge risk so if you are thinking about doing it, try to find a lender that allows you to be co-guarantor. This way you will only have to guarantee a portion of a loan. If you choose to guarantee 20 percent of the price of a property you will still help the borrower get away from the costs of Lender’s Mortgage Insurance that apply to loans greater than 80 percent of the property value.
If you have a job with a consistent income you might think that a loan won’t represent a problem for you, and you might be right. However, think about yourself in the future. Is this job stable enough or is there a chance that you won’t be working in the same place in a year? Is it possible that other unexpected expenses will appear in the future?
You must analyze all possibilities before you take loans that require guarantor. You must remember that this is a long term commitment and you need to have a stable income in the next years as well.
Take the loan seriously
If your guarantor is part of your family, you may be tempted to think that this is not that serious. However, it is very important for you to be aware that this is a business agreement just like any others. Make sure that you get informed before you make such a loan and don’t be afraid to ask an expert for financial advice.
You should always remember that if you are not able to pay back your guarantor will be the one that has to suffer the consequences. That person might lose important assets of even their house, you it is vital that you are able to handle the debt.
Make sure that the guarantor won’t need a loan as well
Many guarantors might need a loan for them too. However, if the life of the loan that a person guarantees is not over, that person won’t be able to get a loan. Therefore, before you agree to guarantee for someone you must think really well if you will need a loan for yourself.