There are certain things you should do and other things you should avoid doing when it comes to guarantor loans. A guarantor loan can be a very helpful borrowing solution for those who need a substantial sum of money quickly, but there are a lot of things that you should know about them before applying. The last thing you want to do is make a simple mistake that could literally end up costing you sometime in the future. When you spend some time learning about these do’s and don’ts of guarantor loans, you will be much better off as a borrower.
DON’T: Borrow More Than You Can Afford to Pay Back
One of the things that you should never do when it comes to getting a guarantor loan is to borrow more money than you can realistically afford to pay back. You should spend as much time as it takes to go over your current financial situation to determine whether or not you are currently making enough to pay back your loan by the agreed upon due date. It might be tempting to do this, but you will just end up regretting it soon after.
DO: Find a Guarantor You Can Trust
You will want to spend a decent amount of time looking for the right person to act as your guarantor on the loan. This person will be put on your loan contract, and they will be legally obligated to pay back whatever you are not able to in the event that you can no longer make payments. You should also make certain that it’s someone that you can trust to pay back the loan if you cannot. If neither you nor the guarantor pay back the loan by the due date, both of your credit will suffer as a direct result. This is a point that cannot be emphasized enough, so you will need to keep it in mind before applying.
DON’T: Choose the First Lender You Come Across
The lender that you choose for your guarantor loan should be highly reputable, because otherwise you are just setting yourself from trouble later on. You will need to make sure that you choose a highly reputable lender that has an impeccable reputation so that you don’t have to worry about whether or not you are going to get a good deal. Those who rush into choosing a lender usually end up regretting it in a big way.
DO: Read the Terms of the Loan
The terms of the loan will all be laid out in the contract that you will be required to sign with the lender in order to get your money. Take the time to read carefully over the contract so that you don’t miss anything important. These terms will state everything from the length of the loan term to how much interest you are going to pay, so it is crucial that you understand them in full before proceeding. Those who quickly skim through the loan contract are taking a huge and ultimately unnecessary risk by doing so.
DON’T: Keep Your Lender or Guarantor Out of the Loop
If you find yourself struggling to make payments on the loan you have taken out, you will need to make sure that your guarantor and lender are both kept in the loop. This means letting both parties know what is going on at all times. There is a chance that you can work with the lender to renegotiate the terms of your loan if you don’t think you will be able to pay it back on time.
Some lenders are more flexible than others when it comes to doing this, but it’s still worth trying. The last thing you want to do is to not let the person acting as your guarantor know what is going on this situation either, because they could end up having to take over your payments on the loan.
DO: Pay it Back Earl if You Can
It’s always a good idea to pay back your loan early if at all possible. There are various ways that you can supplement your income to accomplish this, including getting another job on the side. Make sure that the lender won’t penalize you for paying back the loan early, as this can sometimes be a problem with certain lenders. The earlier you pay back your loan, the more money you are going to save. You don’t want to pay any more interest than you need to, which is why it’s a good idea to pay back the amount you owe early if you can. By doing this you will also reduce your stress level quite a bit.
DON’T: Fall for Loan Scams
There are a lot of different loan scams that exist today, and you will need to make sure that you do not fall victim to one of them. You should be aware of some common signs of a loan scam, including upfront fees and lenders without a physical address or the proper credentials. This is why it is so incredibly important that you look into each lender very closely before deciding which one to borrow from. The last thing you want is to borrow from someone who is just going to take your money and run.
What to Consider Before Applying for a Guarantor Loan
There are some things that you should think about before applying for a guarantor loan, such as whether or not you can really afford one. Take a close look at your finances before making this decision so you don’t just end up defaulting later on. Make sure that you have found someone who can get approved as your guarantor as well. The person who acts as the guarantor on your loan needs to have a good credit rating, stable job history and adequate income. The more time you take to find this person, the more time you will end up saving yourself overall.