May 16, 2023
They say that a friend in need is a friend indeed. If this friend of yours helps your borrowing as a guarantor, then you have ‘reasons to rejoice.’ However, some norms come with guarantors too. You have to find out if they are in your favor as well.
For this post, we will learn about a guarantor’s definition and how it relates to the guarantor being a homeowner. Does it influence the borrowing process? Is there any special rule for a guarantor who might own a home? Let’s find out in the next passage.
Who Would We Call a Guarantor for a Loan?
When a borrower may have financial issues, and he or she might face difficulties in repaying the loan, the lenders advise a guarantor. In plain words, you can bring a guarantor and, thus, look for a guarantor loan as an alternative when you cannot afford a loan.
The need for a guarantor is simple. A guarantor secures the loan for a lender. Please remember that a guarantor loan is still a personal, unsecured loan. It does not include collateral. But if you somehow fail to repay the loan and become a defaulter, your lenders will approach the guarantor for repayment.
The guarantor can be a person such as your friend; a family member; a colleague; your employer, and many more. Again, a group of people or an institution can also be a guarantor. For example, you are running a business partnering with another one. You can take out a business loan with your business partner as your guarantor.
Can My Guarantor Be a Homeowner?
Yes! But many points come into play. Your guarantor’s willingness and then his or her finances will come into play. In most cases, loans for tenants need to be secured. So, your guarantor’s property will not be important for you to gain the money.
Standard Norms for a Guarantor Loan
You can get a guarantor loan with your landlord as a guarantor. However, there will be more than formal procedures to get the loan approved. This is because of the guarantor’s financial conditions and other relevant details.
- Your guarantor’s earnings and financial conditions will be checked and verified. This is because your lender wants to ensure that the guarantor you are choosing (your landlord0) can repay the loan deal if you cannot.
- The guarantor must agree to share financial details such as bank account information and credit score. A low credit score might complicate the lending a little further. However, there are solutions to it too.
- Your guarantor must sign a contract where they agree to repay the remaining loan amount or the full amount if the borrower fails to repay the money in regulated terms.
- In these agreements, particularly when a tenant is looking for a tenant loan, the guarantor must agree to the terms to pay the tenant fees if the tenant fails to make it.
Many landlords may seek active guarantor policies for a tenant loan. However, it isn’t always the case if you can seek alternatives for a guarantor loan.
With these points discussed above, we can easily say that a homeowner can easily serve your loan’s guarantor policy. However, it is also true that this process has some complications.
Possible Issues for a Tenant Loan with a Guarantor
These issues we are speaking about may rise mid-term. This means you can enjoy the loan in the beginning. But things can go a little differently in the middle of the term. It can become cluttered for both you and your guarantor.
- Your guarantor may suffer financial issues
- He or she may go through larger problems, such as unemployment or bankruptcy
- You and your guarantor can have personal misunderstandings, which can lead to erroneous repayment
- The guarantor might not repay the loan, which might bring legal problems.
In this regard, borrowing without a guarantor makes very good sense. If you contact private lenders in the UK, you will find that many of them support loans for tenants with no guarantor. The explanations for that can be discovered in the subsequent point.
Why a Loan for Tenants with No Guarantor Makes a Little Sense?
It is because, in most cases, borrowing needs to be free from hassles. You do not want to be financially cluttered to get a loan. This will keep the entire borrowing experience easy and organised as well.
- Choosing a no-guarantor loan has its own perks. When it is a tenant loan without a guarantor, you might enjoy even more perks. A few of them are written below:
- You can soundly organise your repayments. You don’t have to worry about the monetary prerequisites of the guarantor and its probable pitfalls.
- Your loan term will be optimised better. You can arrange your repayments and make financial plans to manage them better.
- Research shows that a no-guarantor loan keeps a borrower more informed and oriented to personal finance. Thus, you can educate yourself financially if you have taken out a no-guarantor loan.
- Practically, a guarantor loan keeps you relaxed. But, in reality, the possibility of the guarantor’s finances may reverse that comfort of your mind. In that regard, choosing a no-guarantor loan is a better solution because it will not keep you worried about the guarantor’s financial issues.
If you need help learning more about loans with no guarantors, particularly when considering renting your home, then you need to have a clear word with your private lender.
Also known as a direct lender, a private lender allows you to understand different kinds of loan products. That’s why the discussion part is important. After learning more about these loan options, you might choose another loan, such as a bad credit personal loan, as an alternative to a tenant loan. Go ahead and make this research. It will certainly help you find the best loan product.
Ellie Brown is a proud resident of the UK and love to be a content writer and editor for the last 9 years. Writing blogs and articles is her passion that one can explore at the top blogging platforms. Ellie holds a key position at Florafinance as the Senior Content Editor and Chief Loan Consultant, leading a team of more than 70 professionals. Ellie Brown covers the major aspects of the UK’s lending industry in her blogs and guides loan seekers who come at Florafinance to apply for a loan. She possesses the Post-Graduate degree in Finance and Investment.