Top 4 Misconceptions about Guarantor Loans
Guarantor loans are becoming increasingly popular today as they provide people who have a bad credit history, with a chance to borrow money for any purpose they require. However, there are a few myths regarding these loans that have started circulating over the internet. Owing to these myths, many people have started doubting the credibility of a guarantor loan. Here are the top four misconceptions that have misguided many people.
1) Guarantors need to provide all personal details
Many people believe that a guarantor loan can only be achieved after the guarantors have provided all their information, including bank account details and financial records.
This is not true. There are very few lenders who make the guarantors bank details a definite requirement for the processing of the loan; these are large companies that have elaborate loan application processes. Most lenders, who are relatively smaller, and wish to fortify relationships with their clients, do not even ask for these many details, and tend to rely on the guarantor and their client.
2) Guarantor loans come with very high interest rates
A guarantor loan might have a relatively higher interest rate than usual but the rate may be only slightly greater. It is unfair to say that guarantor loans cost more than regular loans. This is because, while most regular loans cannot be availed with a bad credit history, it is possible to get a guarantor loan even with a poor credit score. Therefore, the higher interest rate will compensate for the low credit history. Yet, there are several companies that are willing to offer guarantor loans on the same interest rate as regular loans. Compare various loan interest rates from various lenders on sites like Quiddi Compare.
3) Guarantor loans are only applicable for small amounts
While many people believe that a guarantor loan is applicable when a small amount of money is needed, this has little truth to it. During the past few years, the maximum amount for this type of loan has increased, and continues rising. Of course, the maximum amount is not the same as what a regular loan has; yet, the amount is a considerable one. Guarantor loans have been applied for the buying of houses, cars of for the starting of a business, and it will be unfair to consider the greater limit of the loan as a minimal figure.
4) Loans must be secured against the property of the guarantor
Another common misconception regarding a guarantor loan is that the loan has to be secured against the guarantor’s property. This is not true. Although there is a condition for loan approval which states that the guarantor must be a homeowner. Unlike what happens with secured loans, guarantor loans do not require any security against property. The reason for the condition is to ensure that the guarantors are able to make a monthly loan payment without it affecting their mortgage rates. This is why people, who own a house, and have a proven financial record or mortgage payments, are the ones who can qualify as a guarantor.