What Does Being A Guarantor Mean? What are the risk?

In the present day, having a good standard of finances is crucial and there is no denying that many of the problems that people face in life are financial.

This is why we would prefer to see our friends, family members and loved ones in a better financial position or situation, but it can be difficult to know how to help them. It is certainly not as simple as providing your loved ones with money. After all, not many of us are in a position where we can hand over money willingly, even though we would love to if money was no option in life.

There is also the fact that handing over money may not be the best way to teach people about financial responsibility and making good decisions in life.

There is also the fact that many people would not want to be in a situation where they owe money to someone they care about. This is the sort of the thing that can ruin a relationship, and this means that many people will actively avoid getting involved with this agreement.

You will also find that many people would prefer not to ask someone they love for money, because it can put them in a bad position regarding the relationship. All in all, there isn’t a lot that people can do to improve the financial outlook for someone they care about who may be experiencing a bit of financial trouble.

Acting as a guarantor can provide assistance to a loved one

There is one way that people can help though and that is by acting as a guarantor. When someone agrees to act as a guarantor, they agree to take on the shared responsibility for someone’s debt. In the case of acting as a guarantor for a guarantor loan, the guarantor will take on responsibility for the loan repayments.

The presence of the guarantor provides the lending company with a greater degree of confidence in receiving payments for the loan. This means that they will be more likely to offer a guarantor loan to the applicant. The benefits of a guarantor loan include:

• They are available to people with bad credit history
• They are available to people with no credit history
• They have a very affordable APR
• They can be paid directly into the borrowers account in 24-48 hours

These elements make a guarantor loan a highly attractive proposition, and it is the role of the guarantor which brings it all together. Without a guarantor, the applicant will not be able to pick up this style of loan, which means that they will likely be faced with obtaining a payday loan.

Payday loan companies provide loans for people with bad credit or no credit to people without a guarantor in place, but there is an additional pay-off. This comes in the fact that the APR associated with these payday loans are extremely high. Even if the loan is paid back in a short period of time, the level of interest can be very high, and this places great pressure on the borrower to pay the money back.

This often ends in the borrower being unable to pay the loan back, and requiring an additional loan or to roll over their loan to be able to pay it off. This actually makes a person’s financial situation worse rather than better, so it is easy to see why a guarantor has a big role to play in helping a friend or loved one improve their finances.

If the borrower makes all of the payments, there is nothing for the guarantor to worry about

If the borrower makes all of their payments on time and in full, there is no problem and the guarantor will not be impacted in any way. This means that there will be no impact on the credit rating of the guarantor, which has to be seen as a positive thing.

However, if the borrower defaults or misses one of the payments, the responsibility will fall on the guarantor. This means that you need to make sure that you have sufficient funds to pay the loan if needs be. Again, if the borrower is able to pay the loan, the guarantor will not have an issue, but you need to be prepared for the worst case scenario if you are willing to act as a guarantor.

This is why being a guarantor is a big responsibility, and not something to rush into.

Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn't sat behind a laptop or researching a story, he will be found watching a gig or a game of football.

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We would love to hear from you about your experience as a Guarantor.