How to get Guarantor Loans

Learn the basic information about guarantor loans, the advantages, and disadvantages, as well as how to find a guarantor and what requirements he must meet.

Many young people dream of studying in the United States, and with hard work, some of them manage to enter a prestigious university. However, before you go to America to your dream college, you need to understand where to get the necessary money for education? Generally, it is much easier for a US citizen to obtain a student loan than an immigrant one. Thus, if you find yourself in such a situation, you need a guarantor in order for your Personal loan to be approved.

What is a guarantor on a loan?

A guarantor loan is a type of secured loan that helps immigrants and other people get money for their needs. This loan differs from others because, in order to obtain it, you need a guarantor.

So, a guarantor is a person who is an American citizen and has a good credit score, who agrees to take responsibility for your loan in the case that you cannot pay it back. Thus, since immigrants usually have no credit or bad credit, it can be difficult for them to get a loan, but having a guarantor is a good opportunity to get money.

As already stated, a guarantor must be a US citizen or permanent resident. Its role is that the lender receives additional guarantees that the loan will be repaid. Typically, your friend, partner, a family member can act as a guarantor.

What is the difference between a guarantor and a co-signer?

If you are applying for a loan from banks or lenders, then someone must take responsibility for your loan if you are unable to repay it. Typically, both a guarantor and a co-signer can be your decision, since lenders accept both options. Of course, in order to obtain a loan, your guarantor or co-signer must have an excellent credit history, which will be able to guarantee the lender to pay the debt on time. However, what is the difference?

For the bank, there is no significant difference between them, but for you, the difference lies in responsibility. If you are applying with a co-signer, you should know that he is equally responsible for your loan. If you are applying with a guarantor, then it is worth remembering that he is a secondary form of repayment. Thus, a guarantor is only liable when the borrower cannot repay the loan on time.

Thus, having studied the difference, you and your potential guarantor or co-signer can make a choice that suits you best. It is most likely best to choose a guarantor, as he has less responsibility than a co-signer.

Advantages and disadvantages of Guarantor Loans

Of course, before submitting an application, it is important to study the advantages and disadvantages of this type of lending in order to understand whether this loan offer is right for you or is it worth finding something else. Carefully review the information below to make the right decision.

Pros of guarantor loans
  • A guarantor increases your chances of getting a loan. Of course, if you are an immigrant, the lender is at great risk in providing you with a loan, so he often asks for a guarantor or co-signer in order to reduce the risk of non-payment of the loan. Thus, if you have a guarantor, you will most likely be approved for a loan.
  • If you do not have a credit history, you just need a guarantor. Lenders are already reluctant to provide loans to immigrants, and if you have no credit history, chances are very high that you will not be approved. Thus, if you have a guarantor, you will be able to receive money due to his good credit history.
  • The guarantor gives you access to a larger amount of money than without him. Even if you find a lender who is willing to provide you with a loan, most likely he will offer a small loan and high interest rates. However, if you have a guarantor, the loan amount can increase, as the lender will be confident that you will pay off the loan on time.
  • When contacting a bank, it is also worth remembering that they most often provide loans to borrowers with good credit. So, if you are an immigrant without credit, you have almost no chance, but if your guarantor has good credit, then you can get a loan.
Cons of guarantor loans
  • Unfortunately, many lenders offer high interest rates to immigrants. Even if you have a guarantor, this will not increase your chance of getting a better deal, as you are still at risk.
  • It is also worth remembering that before making a person your guarantor, you will need to open your financial books to him. Thus, it must be a close person whom you trust, otherwise you may have a lot of problems.
  • Moreover, if for some reason you miss the loan payment and your guarantor is held liable, his credit account may suffer. Thus, it is important to understand that you are risking a good credit history for your guarantor.

How do you find the right loans guarantor?

Finding a guarantor is often a difficult task. Most people turn to relatives in order to ask them to become a guarantor, but if you are an immigrant and you do not have relatives who are US citizens, then this can be more difficult. If you have friends or colleagues with good credit who can help you, you can turn to them.

However, if you don't have friends or acquaintances who are willing to be your guarantors, you can ask your lender if they have a list of potential ones. Typically, a lender can help you find someone. If even the lender cannot help you, you can always turn to a commercial guarantor.

A commercial guarantor is a person or company that provides the services of a guarantor and charges a nominal one-time fee. This way you can get the loan and the money you need.

What to look for when looking for a guarantor?

As mentioned, finding a guarantor can be a difficult task. In order to select the right person, you need to make sure that they meet the required requirements. Learn the main ones.

  • First of all, a potential guarantor must be available in order to come to the signing of papers and other necessary meetings. Thus, he should have some free time to devote to obtaining a loan.
  • A potential guarantor's credit rating must be good or excellent. This is an important requirement in obtaining approval, so it is important to check the assets and rating of the guarantor.
  • If you have resorted to a third-party guarantor, you can check with the lender if they have a list of potential ones.
  • It is also important to meet with your guarantor in order to discuss the contract, terms, and payment period.

Information for potential guarantors

Before agreeing to be a guarantor, your friend, partner, or commercial one must follow certain rules that will help both parties avoid problems.

  • The guarantor must carefully study the entire loan agreement in order to know all his rights and obligations. Thus, both the borrower and the guarantor will be able to avoid misunderstandings and disagreements. It is better to discuss all contradictions before signing the contract in order to avoid unwanted problems.
  • Before signing the contract, the borrower and the guarantor should visit a lawyer and hear about the risks they are taking. Thus, it is important to weigh the pros and cons before making such a responsible decision.
  • If the guarantor is a relative of the borrower, then both parties should think before entering into this agreement. Otherwise, if the borrower cannot repay the loan and the guarantor is forced to repay it, both parties risk confronting misunderstandings that could lead to bad family relations in the future.
  • If the guarantor has doubts, it is worthwhile to weigh everything once again and refuse, if necessary, before it is too late and he has not taken on unwanted obligations.

In conclusion, it is necessary to say that finding a guarantor can be difficult and exhausting. However, it is important to find someone who is truly willing to take responsibility for the actions and decisions in order to avoid problems. It is important to remember that the borrower is obliged to repay the loan on time, otherwise, the guarantor will be forced to do it for him, which will undoubtedly lead to unpleasant consequences. Therefore, assess your financial capabilities sensibly before applying for a loan with a guarantor. Make sure you can pay off the debt on time.