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What is a Guarantor?

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Sometimes borrowing money can be difficult. Creditors might be afraid to touch us if we have no real credit history. We can appear like too much of a risk. This is where a guarantor comes into the picture. Having one of these people in our corner can greatly increase our chances of getting a loan. Of course it is not always easy to find such a useful personage; especially one that the bank will be willing to accept.

So What is a Guarantor?

This is an individual who is willing to offer a guarantee that the loan is going to be paid. This individual is so sure that the money will be repaid that they are willing to take over the responsibility should the debtor fail. Become a guarantor can be a lot of responsibility and this is why people can feel a bit hesitant about taking on the role. It is often only somebody who is really close to us and trusts us that will be willing to perform the function. For example, it is common for parents to do this for their children who are applying for student loans.

Even if you manage to get somebody to take on this responsibility there is still no guarantee that you will be given the loan. The credit history of the guarantor needs to be examined and if they don’t meet the criteria then the bank is likely to refuse the loan. Having this signature though, does increase your chances greatly because it means that both credit histories will be combined to make your application more appealing. In some cases it is even possible to have multiple people offering their signature for this which can further increase the chances of the loan being granted. The fact that there are multiple signatures also spreads the risks should the lender default. As well as getting an individual to act as a guarantor it is also possible to take on the same responsibility.

The Dangers of Becoming a Guarantor

There are some huge risks involved in taking on this responsibility and this is why people should think long and hard before agreeing to it. Not only could the person signing end up liable for a debt belonging to somebody else, but it can also interfere with their ability to borrow money. This is a risk that we may be willing to make for somebody very close, but it is certainly not something we will want to do for a stranger on a whim. It is important when taking on this role to check the contract fully and to get legal advice if there is any uncertainty.  Of course it is also important to look at the lender’s financial position because you are taking a risk on their behalf. Most people prefer to keep their financial situation personal but a guarantor needs access to this information in order to make such a risky decision. Taking on this role should never be done lightly.

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Meet the Author

Anthony Carter currently resides in Fife, Scotland with his wife Lisa, and their three wonderful children. As a senior editor for various publications, if he's not reading and writing, you would find him photographing and traveling to some of the most far-flung locations around the world.

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