When a person decides to go for a loan and his or her credit rating does not allow to borrow the loan without security then most people go the loan guarantor. A loan guarantor is a person who agrees to stand in for the person who wants to take a loan and fully agrees with terms given by the loan lenders. Also a loan guarantor takes full responsibility of paying up for the loan that is not paid for by the person who took it.
Becoming a guarantor
Becoming a guarantor is a legal obligation and one is bound by it. These legal obligation is what gives the loan lender the powers to go after the guarantor to pay up the loan. By accepting the responsibility the loan lender register that loan debt on your credit report. Any lender cannot give out money before accepting you as a guarantor they must do a background check on you to determine your credit and your past experience about loans. For guarantors it is important for them to know that they are tied up by the borrowers so it will automatically have an implication on your credit report.
This is a plus for the guarantor because when the borrower does his or her payment on time then the credit report of the guarantor changes for the good of the guarantor. It is important because it will help you as a guarantor when now you will want also to borrow the loan you will be viewed as an on time payer of the loan. For loans accounts that have a history of paying on time has a very strong credit profile and any loan lender will no hesitate to give you any loan that you may require.
It will be bad news for the guarantor if the borrow does not pay his or her loan on time hence making the loan lender stick on your neck. By the borrower defaulting it means that your credit rating will not have a good record with lenders. In the agreement that is signed between the loan lender and both the borrower and the guarantor is binding and so the guarantor takes full responsibility of the loan. In some cases also the guarantor will decide not to pay in a context that they did not share the money, what will happen is the burden will be carried to the credit rating of the guarantor. At some point it will become a debt that the guarantor will have to pay because even the debt collector’s agencies will be involved. More details in this post: http://www.westelginchamber.ca/why-getting-unsecured-loans-with-bad-credit-should-not-be-ruled-out/
Actually being a guarantor of someone who is taking a loan is taking a very huge risk as a guarantors because when he or she default paying you are the one who will be held responsible for repaying that loan. It is important for the guarantors to understand that before standing in for a person to take a loan you should take it your duty to have a deep analysis of the person. Also the guarantor may advise properly by suggesting on the borrower to take the option of same day guarantors loans.