Looking for credit in this day and age when you don’t have a particularly great credit history will probably have brought you to the door of a guarantor lender. Guarantor loans have grown greatly in popularity since the recession hit and the mainstream lenders became more wary about lending to anyone who couldn't prove they were great at paying credit back. They’re pretty popular now as a result, and although they may seem like a new concept, the fact is that guarantor lending used to be the only way to borrow if you didn't have an asset to borrow against.
The Support of the Guarantor
If you've taken on a guarantor loan in the last couple of years, you’ll know that the guarantor (a close friend or family member) is an integral part of the process. They sign a loan agreement along with you, and therefore agree to pay any loan instalments that you can’t pay. This is rare, as most guarantor lenders will do a full check on anyone they’re lending to, in order to ensure that the loan is affordable to them. To avoid doing these checks would be unfair to both the borrower and the guarantor, as both would end up in trouble through the borrower not being able to pay.
One of the main things that you need to do as a borrower, aside from making sure you meet each and every repayment in full and on time, is staying in contact with your guarantor. It’s unlikely that your lender will contact your guarantor unless there is a problem. For this reason, it may be handy to keep your guarantor updated when you make payments, and you should certainly give them prior warning if you’re worried about making a payment, as this could trigger contact from the lender.
Keeping Your Guarantor in the Loop
Although it may feel unnecessary to let your guarantor know every time you pay a loan instalment, it could reassure them that you’re handling the loan properly and it will act as a gentle reminder that they've signed up to lend a helping hand should something go wrong. There have been cases where a guarantor has been asked for payment, and they've forgotten all about agreeing to be part of their relative’s/friend’s loan. This can cause a bit of tension and stress, so keeping your guarantor in the loop is an important part of managing the loan properly.
Choosing the Right Guarantor
Your guarantor should be someone that you know and trust, so keeping a close relationship with them throughout the loan term is very important. In the case of most, this will be a no-brainer, but for some their guarantor has come from a short but intense friendship which has dissolved or grown apart since the loan was taken out. Keeping in contact with someone (even if you may not have done so without the loan) can really help if you find you have problems paying one month, or if the lender has a query or question that needs answering by them.