What Is a Guarantor
A person or a company that deals in different loan issues and all type of debt issues can be called a Guarantor. If a person fails to pay the debts or to accomplish a loan deal successfully guarantors take the responsibility to pay on behalf of him or her. For example- a parent, who co-signs an educational loan for his or her kids, will be known as the child’s guarantor. If the child fails to pay his or her debts, his father will be responsible for the remainder of this educational loan. The terms used in this kind of deals will be decided by financial institutions.
Importance of Guarantors
Basically a person who is applying for a loan opts for a guarantor if he or she doesn’t have the confidence of repaying the installments personally. Generally, a person who is in need of a guarantor has poor credit history. Sometime they don’t have a credit history at all. A general person or someone who is associated with a financial institution can be a guarantor. There are a few applicants who involve several guarantors for a single loan. In case of such special loans all the guarantors remain liable to pay the entire amount of the loan, if the applicant fails to do so. A few financial institutions require a guarantor to be bonded for a certain portion, usually a certain percentage of a loan to be sure that they can recover the amount easily. This option is good for both the guarantor and the institution that is lending the money.
Who can be a guarantor?
To be a guarantor a person needs to meet the following categories:
- When the loan will come to end the age of its guarantor will not be more than 75. The institutions use to calculate the age first and then involve a guarantor.
- To be a guarantor the person must have a noticeable credit history
- Ho or she should have good earning record. A person who has not retired from work yet can easily be a guarantor.
- A guarantor must owe a home. If he or she lives in a rented house then the person can’t be a guarantor.
- He or she can’t be linked to a borrower financially.
What a guarantor can do
Being a guarantor is a great idea to help someone when he or she is experiencing financial crisis. There must be a good level of trust between the borrower and the guarantor. That is why before involving a guarantor or being a guarantor both the parties must discuss their earning and expenditure to be sure if they can apply for the loan or not.
As it is a monetary deal, you need to be cautious before any step you take. If you have the confidence and the ability to pay the debts, it is really great to be a guarantor.