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Is a Guarantor the Way to Go?

Written By On 23/09/2013

When a person tries to secure a loan and gets refused owing to a poor credit history, some may think of turning to a guarantor as an ideal solution.

Whilst in theory it may be a good idea, in practice it can come come back to bite you. In some instances guarantor loans have caused major break ups within family relationships and friends. Therefore it would be prudent for both parties involved to think about it in a very responsible fashion.

On many occasions a loan being turned down may not be based on bad credit history, but simply on no credit history at all. This could be due to the age of the applicant as he or she are too young to have built up any credit record. Ironically, a more mature person who has chosen to live their life without any borrowing whatsoever can also lose out for the same reasons.

If one should choose to take out a guarantor loan, they must be aware that they are only allowed to have one such type of this loan at a time. Normally a personal loan of this kind can be an amount of up to seven and a half thousand pounds for a maximum term of five years.

A guarantor can also be used when applying for a mortgage, but keep in mind that like a personal loan, this type of mortgage will cost more in interest rates. The most common type of relation used for these is a parent helping their offspring to get on the first rung of the property ladder.

However, as useful as these loans might be, if the applicant should fall behind on their payments, it could have a long lasting adverse effect on the guarantor doing the good deed as well as the loanee.