Regardless of whether you are applying for a small personal loan to get your car fixed or a mortgage loan to buy a new home, lenders will look into your credit score. Your, credit score shows your trustworthiness when it comes to paying your dues. A good credit score improves your chances of getting your loan approved. A poor credit score, however, can be a bit challenging.
Applying with a less-than-desirable credit score is possible. But it can be a treacherous battle. Fortunately, that fight will be easier conquered if you have a guarantor.
What are guarantors and how can they help you secure the loan you need? This article will discuss all you need to know.
What Is a Guarantor?
A guarantor is someone who guarantees someone’s debt or obligation. This means that your guarantor promises to pay your debt if you do not pay it or if you fail to meet the obligations completely.
Guarantors may be anyone. It can be a family member, friend, or co-worker. But most of the time, they are family members like parents or spouses.
Are Guarantors and Cosigners the Same?
Guarantors and cosigners have similar obligations. They are both needed to support a loan in case an applicant’s credit score is lacking. Both act as the lender’s guarantee that the money they loaned will be paid in one form or another. They differ in the kind of loans that they can guarantee.
Cosigners are people who guarantee payments for loans that require collateral. Vehicle loans, car title loans, and life insurance loans are some loans that can involve cosigners. Guarantors, on the other hand, cover loans that do not need collateral. These can be consumer loans, student loans, and the like.
Why Do You Need a Guarantor When You Have a Low Credit Score?
Since credit scores are measures for a person’s creditworthiness, most lenders consider low credit score applicants high risk. This means that the chances of those applicants will not pay their loan is high. Therefore, if they take on those applicants’ loans, the potential losses for their business are large.
However, it is another story if you, the person who has a low credit score bring in a guarantor. A guarantor is the lender’s assurance that the money they loaned you will be paid. Whether the payment comes from you or your guarantor, it will be paid somehow. Hence, getting a guarantor is one of the best ways to secure a loan, even with a subpar credit score.
Who Can Become a Guarantor?
Guarantor requirements differ from one lender to another. However, most lenders need a guarantor to fulfill the following conditions:
- Should be at least 18 years old
- Must have a valid US address
- Needs to be of good credit standing
- Must prove sufficient income flow
How to Become a Guarantor?
Again, every lender has their process of adding a guarantor into a loan contract. But most of them would go through the following:
- Accomplish the loan application with the guarantor
- Supply your and your guarantor’s personal and contact information
- Provide all required documents, including the guarantor’s proof of income and good financial standing
- Wait for the application processing
- Get the results of your application
One of the ways you can get your loan approved despite a bad credit score is through a guarantor. However, a guarantor is there as your lender’s safety net and not your excuse to not pay your debts. Remember, your debt is your responsibility. Your guarantor is just there to help you get your foot in the proverbial door to a better financial future.
Turn to Magnolia Finance Company when you are looking for one of the best, loan companies in Huntsville, AL. We offer reliable financial solutions with affordable payment schedules and without any hidden fees! For trustworthy same-day loans, call us today!