A guarantor is a name given to someone by whom it is pledged that a loan or other type of debt will be paid. Usually, a guarantor agrees that he or she will pay or perform another person’s debt or duty if that person fails to do so. Most commonly the term is used in reference to financial assistance.

Using Guarantor doesn’t mean that loan will be approved

It does not mean that if a guarantor is used by you than a loan application will go through, due to the reason that the guarantor is considered part of the loan application, and along with the other applicants his or her credit will also be evaluated. If it is felt by the lending institution that the guarantor cannot make good on the debt, then loan will not be approved by them. So when looking for a guarantor, then you should keep this in mind.

When a Guarantor is used?

Generally, the applicants feel that are unable or unwilling to secure a loan on their own then they use a guarantor. This might be the case if the applicant is having a poor credit or no credit history. Individuals and corporations a like can serve as guarantors or they may have guarantors for their loans.

Multiple Guarantors

If we talk about multiple guarantors, then usually each one in that case is liable for the entire amount of the debt. It is the requirement of some lending institutions that guarantors should be bonded for a certain amount, usually a percentage of the loan, so that the institution can be confident that they will be able to recover the money.

Things to consider before becoming a guarantor

It’s important to assess the primary borrower’s credit, income, and expenses, before agreeing to serve as a guarantor, in order to determine whether or not he or she is capable of handling the loan. Guarantor should be prepared to repay the entire amount if the primary borrower defaults and if they are unable to do so then they shouldn’t agree to offer a guarantee. You should find out that if the amount being borrowed is fixed, and if yes then at what amount. Make sure to have a copy of the loan contract and also you have to read and fully understand it before signing, because there is no way to back out of a guarantee.

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