Guarantor Personal Loans Bad Credit
A bad credit score can be a huge obstacle for anyone who needs to apply for a loan. However, not all types of loans require a good credit score. In fact, some loans are tailored specifically for those with bad credit history.
For instance, applying for guarantor personal loans with bad credit is possible in Australia, and we’re going to walk you through all the details you need to apply for this loan type.
What Is a Guarantor Personal Loan?
When we trialed this product, a guarantor personal loan is a loan where a guarantor co-signs the loan agreement with the borrower. A guarantor must be closely related to the borrower; they could be their brother/sister, mother, or father. Getting a relative to guarantee your loan provides security for the lending entity to get the loan’s value one way or another.
It’s worth mentioning that the lending entity may require that the guarantor use their property as an additional security measure. The property can be a house, a car, or even a yacht, and it must be inside Australia. What’s more, the guarantor must have equity in their property.
Note: The property’s value can either be equal to or slightly less than the loan’s full amount.
Can You Get a Guarantor Personal Loan With Bad Credit?
One of the most significant advantages of a guarantor personal loan is that you can apply for it even if you have bad credit. That’s actually the primary reason people opt for guarantor loans; they don’t require an impressive credit score to be approved.
However, it’s worth noting that while it’s OK for the borrower to have bad credit, the guarantor’s credit score should be better than the borrower’s.
Types of Guarantor Personal Loans
Generally speaking, there are two types of guarantor personal loans: unsecured and secured. An unsecured guarantor loan is when the guarantor just co-signs the loan agreement because they have a better credit score than the borrower. No properties are needed to secure the loan.
On the flip side, a secured guarantor loan lets the guarantor use their property as collateral, providing the lender with extra security.
Each of the two types has its own advantages and disadvantages. For instance, an unsecured loan is less risky for the guarantor because they wouldn’t lose their property if the borrower defaults their loan. However, these loans are usually offered at high-interest rates.
Conversely, secured loans have lower interest rates, and they protect the borrower from spending prison time if they failed to repay the loan on time. They’re also a safer option for the lender.
Choosing between the two types depends on several variables, like the loan’s amount, the property’s value, and how close you are to the guarantor.
Guarantor Personal Loan Requirements
Drawing from our experience, to apply for a guarantor personal loan, you and the guarantor must be Australian citizens. You also need to be at least 18 years old. Moreover, the guarantor should have a regular monthly income and a good credit score.
As indicated by our tests, some lending entities may not accept a guarantor who has reached or about to reach the retirement age, so make sure to keep that in mind when applying for the loan. You can apply for fast guarantor personal loans online or in-person depending on the lender you choose.
Benefits of a Guarantor Loan
There are countless benefits of a guarantor loan that can be summed up as follows:
- Lets you borrow an adequate amount of money to get into the property market
- Has a lower APR than other unsecured types of loans
- Doesn’t require a great credit history
- Flexible payment plans
- An excellent option for students
- Doesn’t require an LMI (Loan Mortgage Insurance)
Guarantor Personal Loan Risks
Just like with any types of loans, a guarantor loan isn’t risk-free. Here are some of the potential problems that you may face when you apply for a fast guarantor loan:
- The guarantor may lose their property if the borrower defaults on the loan’s value
- Not making the payments on time will hurt your credit score
- Some lending entities have exaggerated interest rates
Also, keep in mind that a guarantor loan can be risky because of the unforeseen circumstances that can potentially happen, like job loss, salary cuts, disability, or even death. Fortunately, you can apply for a loan guard to protect yourself when things don’t go as expected.
So, can you apply for guarantor personal loans with bad credit? The short answer is yes. However, you must plan out everything before applying for the loan to avoid debt accumulation and getting your guarantor in trouble.
The fact that you applied for a guarantor personal loans means that your credit history isn’t something to brag about, so make sure you make the best out of this opportunity to improve your credit score and make a new statement.v