6 Reasons Why Guarantor Loans Can Be A Smart Financial Choice
Accessing loans can be a bigger challenge because you have much to prove and justify to get the amount you need. Your credit history can be the biggest impediment to getting the cash you desperately need. Faced with such an opportunity, most people tend to go for bad loans with higher rates, forgetting the best options like guaranteed loans.
Unlike other loans, guarantor loans require that someone back your loan application and act as guarantor in the event you default on your obligation. The guarantor is more like your collateral and gives assurance to the lender that they will recover the cash.
Due to safety concerns, you can always turn to guarantor loans instead of losing your property and business to bad loans. Whether you need a loan for business, home improvements, or other needs, below are reasons why guarantor loans should be your best choice.
1. Flexible Loan Terms
Lenders have government guidelines and market rates they must observe and impose on anyone who takes out loans. Due to such conditions, lenders can only give you a loan if you meet the criteria and what you qualify for. Your negotiation capabilities and offers are limited even if it is less than needed.
Faced with such an option, you can opt for other less-regulated lenders, which may not be the best solution. These predatory lenders can take advantage of your loan desperation to set some of the worst loan terms.
The only solution to all these situations is guarantor loans. Although they rely on market and government-approved rates, they can offer more flexible repayment duration and interest rates.
With such offers available and negotiated, you can repay the loans without feeling any constraints. Remember, they would also not wish that you do not default, hence the amazing terms.
2. Potential For Lower Rates
Lenders are likely to set exorbitant rates based on the risk that you impose. You are vulnerable to predatory lending rates if your ratings are low and you have limited or no collateral. Such lenders take advantage of the situation and your desperation to benefit.
However, guarantor loans are friendly, giving you a chance to negotiate the loan rates. Since they are sure you will pay, the rates can be negotiated to avoid burdening you to the extent of defaulting. Ideally, most also adjust the rates based on the market conditions to avoid defaults.
Finally, due to the security offered through a guarantor, the lender perceives no significant risk, which would push for higher rates. Regardless of the amount given, the rates may be lower or higher to ensure flexibility and peace of mind when repaying.
3. Unlimited Credit Access
Having a poor credit history can immediately affect your ability to obtain credit, especially from banks and other micro-lenders. The moment your credit history is below certain levels, no lender will be willing to listen to your requests.
Instead of missing out on the finances you need and watching your business or venture fail to come to reality, you can opt for guarantor loans. Someone like a friend or a relative can guarantee the loan, enabling you to access the loan without any further issues.
Once you cosign the loan, you can easily get the agreed amount without needing any further paperwork, approvals, or collaterals.
Lenders will likely trust you since if you fail to pay or are unable to pay, someone else will pay the loan. Before you decide on who will guarantee the loan, make sure they have collateral or financial capabilities to pay the loan. This is a critical factor that lenders consider.
4. Higher Loan Amounts
When determining your eligibility, lenders consider various factors, including collateral and current income. However, the amount you qualify for may be different from what you get. Some banks give you less to maintain certain levels of security.
However, you can get the amount you need and more for guarantor loans. That is because the calculator involves factoring in the guarantor's net worth and ability to pay. If the two of you can repay the higher amounts offered, you are likely to get more and negotiate for more.
Therefore, if you have intensive capital needs like home improvement, education, and initial business capital, always prioritize guarantee loans.
5. Simplest Approval Process
You must go through all the loan approval processes despite having a guarantor. This includes the KYC and other government regulations for getting a loan.
Of all these processes, the KYC is always the longest due to the level of due diligence the lender must do, especially for first-time clients. This is due to the security imposed and the possibility of defaults and bad debts.
If you have a guarantor, you give the banks more assurance, and they can offer you the loans without the complex due diligence. In the long run, an application and approval process that was to take a week or more can be done in a few days.
6. Build Your Credit Levels
If you have lower credit, one of the best remedies is to turn to guarantor loans. Your credit level will improve if you commit to repayment without involving a guarantor.
For perfect ratings, you should pay the loans fast and take subsequent ones to boost your ratings. Taking the guarantor loans successively for three rounds would help you boost the rating to the extent that you can get the loans solo.
Conclusion
When faced with the challenges of low ratings, limited loan amounts, and worse rates, your best remedy is to turn to guarantor loans. Regardless of your circumstances, the curator can always act as extra security for your loan application. Besides that, you will get fair terms, further encouraging repayment and solving your low credit rating woes.
