Furthermore, if both you and your guarantor are unable to make the loan repayments, then the consequences would not just be limited to you but they would affect your guarantor as well.
A great example of this is guarantor mortgages. As I mentioned earlier, most lenders require your guarantor’s house to be put up as security. So, if both you and your guarantor fail to keep up with loan repayments, then your guarantor’s house could be repossessed and sold off.
Some guarantor mortgage lenders allow your guarantor to offer savings as the collateral rather than their house. This involves them setting up a bank account with the lender. If the borrower fails to make a monthly repayment, then the lender automatically takes money from the bank account to make up for that month’s repayment.
In the end, I just have to say that while guarantor loans definitely have their place, you must always take their risks into account before applying for one.
When you’re looking for lenders, be sure to only apply to ones that are authorised and regulated by the Financial Conduct Authority (FCA).
Don’t apply to too many lenders at once as this could have a further negative impact on your credit rating.