Is a Guarantor Loan Right for me?
Choosing the right type of loan is really important as it can affect many factors such as the cost, ease of repayment and amount of money available to borrow. Therefore when you are considering whether you should get a guarantor loan, then you should consider these things as well as factors specific to the loan such as who to use as your guarantor.
Cost
Finding out the cost of a loan will enable you to know exactly what you will be paying out in total. It is important because it will give you an idea of how much more expensive the item you are buying is, once you take into consideration the loan cost. You need to think about whether you would still buy that item if it was this price when you bought it.
You should be able to find out the cost of a loan by looking at the terms and conditions and calculating it. This can be quite tricky though as even if you can calculate the interest, you will have to check for any additional fees to add on and this information is not always that easy to find. It is much easier to contact customer services and ask them for the figure and they will be able to calculate it for you.
Repayments
It is important to know how much the repayments will be so that you can calculate whether you can afford them. Although with a guarantor loan, if you cannot make the repayments, your guarantor will pay them for you, borrowers would normally want to try hard to make these repayments themselves. Therefore you need to think about whether they are something that you can afford.
Again, you may need to speak to customer services about how much the repayments will be. If the loan has a variable rate, then the repayments could go up if the interest rate goes up and so this is worth allowing for as well. Look at your income and spending each month and see whether you can afford the repayments or whether you can give up buying certain things so that you can free up enough money to cover the cost of them. Think about the consequences of giving these things up and how you would fee having to do this for the entire time that you were repaying the loan. Consider whether you would still cope if the interest rates went up and think about how much extra you could afford to pay.
Money available
Loan types will differ in the amount of money that they will let you borrow. For example you can borrow far more money on a mortgage than you can on an overdraft. Therefore you will need to think about whether a guarantor loan will have enough money available for your needs. Obviously it is wise mot to borrow more than you need either, as this will lead to extra costs of borrowing. So you will need to think carefully about what money you need and look into whether there are guarantor loans that will provide you with what you need. It should be easy enough to find out how much money they will lend to you if you do a search and look at the provider’s websites. They should have details such as this readily available for potential customers.
Who to Choose to be Guarantor
Choosing a guarantor can be really tricky. You will want to find someone that you trust and that you know has a good income so that they can cover your repayments should you need them to. They will obviously also be willing to act as your guarantor. You will have to happy to ask them about it and then to have a discussion about how you will do your best to make the repayments and things like that. It is really important to think about how having the loan might affect your relationship with them. It may all seem fine, but if you miss some repayments and they have to make them, then this could have an impact on them. It may mean that they have to go without things in order to make your repayments. You will also need to agree with them what will happen in this case and whether you will need to repay them at some stage and if so, how much and when. This could even have an impact on others as well, if they get to find out about it. There could be jealousy form other family members if they feel they would have liked a loan of this type or feel that you are getting special treatment or even more money than them. It can be quite a tricky thing as money is often a cause of contention between family members and can often cause arguments or worse, cause people to permanently fall out with each other.