What is the Guarantor’s Responsibility?
When applying for most types of loans, with an exception of some bad credit loans, lenders will require you to find guarantor to co-sign the contract and accept guarantor responsibility. These responsibilities vary depending on the loan you choose, but in each case guarantor is a lender’s way of securing lent money. The chances are you will need a solid guarantor and he will have to meet higher criteria if you apply for some big amount of money. However, when applying for quick and short-term loans, many lenders won’t require the presence of a guarantor. So, who qualifies to be guarantor and what does a guarantor need to provide.
Who’s eligible to be a guarantor?
The guarantor is, by definition, a person signing a loan contract along with a borrower and accepting to become liable to repay the borrower’s debt if the borrower fails to do so. The lender turns to the guarantor only after all other means of getting the borrower to fulfill financial duties fail responsibly. Therefore, the guarantor is often the last option for the lender to collect its provided loan before charging the borrower for bad credit loans. If guarantor also fails to repay the debt, credit score decreases to him as well. Considering all of this, the guarantor is usually a person closely related to the borrower and financially steady enough to secure lent loan. Depending on the loan model borrower chooses, the guarantor is required to meet various criteria.
Since loan lender turns to guarantor’s debit account to repay lent loan once the borrower has defaulted, the guarantor has to be a person with regular incomes high enough to provide sufficient amount of money at the debit account during every month. Hence, valid proof of employment and regular incomes provided to the lender is the first thing guarantor is responsible for. If the borrower is applying for bigger amounts of money via more rigorously regulated loan system, the lender may set request for the guarantor to be a homeowner. The guarantor who possesses real estates will go through the process of property validation and the lender will estimate the total sum that could be recollected by mortgages and auctions if the guarantor fails to repay the debt as well. In all cases except for some bad credit loans, the guarantor has to have a clear credit history and the more positive credit score the better terms for the loan.
Should you be a guarantor or not
There’s no straight answer to this dilemma since it all depends on the specific situations and individual relations. Before accepting to be a guarantor, make sure you are fully aware of all the responsibilities and obligations you will be liable of and make a reasonable estimation if you are capable of coping with them. Also, make an objective judgment of borrower’s situation, behavior and life circumstances. Only when you trust your borrower enough and see real methods of repaying the loan, feel free to become a guarantor.