January 4, 2020
Guarantor loans are marketed at those who have poor credit standing and have been turned down by other mainstream lenders, underwritten by a family member or a friend to pay off the loan in case you fail to do so. While bad credit loans are available in the market with no credit check facility, borrowers turn to guarantor lending because of low interest rates.
A recent survey conducted has revealed that more than 50% of those seeking helps from financial advisors had issues with guarantor liability. Some people had reported that they ended up paying more than double the loan borrowed and had blamed high interest rates, but the reality is not what you know
Guarantor loans undoubtedly carry lower interest rates compared to other short-term loans because your friend or a family member takes on the responsibility of repayment in case of a default provided they have a good credit rating. You do not need to undergo a credit check. The following are some doubts about guarantor loans with no credit check
that borrowers as well as underwriters have.
Myth 1: Guarantor loans will affect your credit score
Note that guarantor loans are taken in the name of the borrower, which is why they will not affect your credit score. Since you have underwritten the loan, a lender will definitely ask you for a repayment in case of a default, but it cannot show any impact on your credit file as long as the payment is made. The fact that loans with guarantor will affect your credit file is true when both you and a borrower fail to pay back the loan.
Myth 2: You cannot borrow a large amount of money
Like payday loans and doorstep loans, guarantor loans also let you access only small amount of funds, but it does not hold water any more. Bad credit history cannot keep you from borrowing money as much as you want. They will peruse your income statement. As long as you have potential to repay money you borrow, they will never deny lending.
However, you must remember that the repayment capacity of a guarantor also serves as a basis for deciding the size of the loan because the guarantor may not be as financially strong as you, and they are only responsible to pay back money in case of a default.
Myth 3: Guarantor loans are as threatening as payday loans
Many people think than guarantor loans are as damaging as payday loans and therefore do not underwrite the loan for anyone. The survey has revealed that most of the people are sceptical about hidden dangers. Around 47% of guarantors are not fully aware of the extent of their responsibility.
Guarantor loans do not act like a payday loan. When you sign into a contract as a guarantor, make sure that you understand all terms and conditions. If you have any doubt, you are free to ask your lender. Some reputable lenders like Loan palace assist borrowers and guarantors with understanding technical terms.
Myth 4: Lenders unfairly ask guarantors to make payments
This is not true at all. Lenders try their best to work within the scope of their authority. They will never chase a guarantor to make payments without any reasons. A lender reserves the right to call upon a guarantor to make payment in case of a default. It is crucial that you understand all terms and conditions and your liability.
It is always paramount to be fully aware of facts before making a decision as it can change your financial fortunes. You should always ensure that you have complete information about any loan before taking it out or underwriting it.