Every once and a while, people come in a situation where they simply need more money. These moments usually require financial assistance from a bank or some other kind of financial institution. Banks are always prepared to give a helping hand to those customers, since they also charge those services and make a profit through interest rates and other mechanisms. However, sometimes people are unable to fulfill their obligations on time when it comes to payments of those loans and credits. They receive bad credit reputation and stay marked with a poor credit history. This means that the next time they apply for a loan they will be under more scrutiny. They will have less chance to receive a favorable terms when it comes to interest rates and the actual amount of the money.
In a situation where the applicant has a poor credit history, one type of loans can serve as the perfect solution and it can suit their needs perfectly. Banks call them the guarantor loans. This name comes from the fact that they demand a person who will guarantee that the debt will be re-payed in the appropriate period. Guarantor is therefore a person who will “take over” the loan if the applicant is default of the payments or he or she is unable to fulfill all necessary obligations in a timely fashion. This type of loans is especially attractive to people with poor credit records. In this way they are not under the main spotlight, and the banks usually only demand that the guarantor is home-owner.
What mean guarantor?
Guarantor is in fact a co-signor, or a “backer”, of the agreement between a bank and the loan applicant. This role can be very important but it can also be completely irrelevant. If the applicant pays the installments in the arranged manner, the guarantor will be unnoticed and nobody will pay attention to his role. However, if the receiver of the loan becomes unable to pay the necessary amounts in a regular interval, or he stops paying them completely, the role of the guarantor suddenly becomes crucial and the entire obligation of repaying the loan falls on his back. This is the reason why it is essential to pick serious people as your guarantor. Also to serve in the role of the guarantor only to people whom you can completely trust.
Family members or close friends are the best option when it comes to looking for a suitable guarantor. Since relations with those people mean that the margin for mistake is significantly smaller. Guarantor loans are generally issued for periods of one to five years. Most banks do not require any substantial arrangement fees. The only requirement they occasional have is concerned with loans that ask for slightly larger amounts. In those cases banks may have a condition that the guarantor is a home-owner. Other than that, everything is open, and most people apply for these loans because they are affordable, efficient and flexible.