Lenders are so much interested in one’s credit score when applying for a loan. So does it mean that if you have a poor credit score, you cannot get a loan? Chances of not getting one are high, but you can try your luck in what is called a guarantor loan. Below are tips on how to get a guarantor loan.
Applying for a guarantor loan
Find a guarantor
A guarantor acts as extra security for the bank since your credit score is poor, the bank will trust you again because of the guarantor you have. In this case, you must make sure that the person you use has a high credit score. If the primary borrower who is you fails to pay the agreed amount, the bank will look out for the used guarantor for payments.
Make payments on time
As said earlier, a guarantor does not give you a hundred percent assurance that you will get the loan. The bank will check your credit ratings to see if you can make the payments within the agreed time. For the bank to give you the loan, the amount you are borrowing must fall within 1/10th of your monthly income or salary.
Be aware of the risks
A guarantor can be anyone from your workmates to friends or a family member. What you are asked for is to let them know the risks involved with them acting as your guarantor.
Did you know there are loan brokers? If you apply through them, you will have to pay them for the service. To reduce extra charges, take yourself to the lender and apply for the loan directly from them.
Choose the lender carefully
It goes without saying that you must be careful who you choose as your lender. Ask for quotes from several lenders for comparison. With the quotes, you will be able to choose the best lender. A good lender must have pocket-friendly interest rates and a reasonable pay back period.
Understand the consequences
What happens if you do not pay the loan? Your credit score will be affected. You might not be the one to pay the whole amount because the guarantor will, but you will harm your credit score more. It will be harder for you to get another loan in future because the bank will not trust you again and you will not get a good guarantor.