If you have a lot of high-interest credit cards or other debt, you know that you can simplify your bills by consolidating your credit. Also, you can save a lot of money by getting a loan with a lower interest rate than that of your current debt. However, if you have a poor credit history or not much credit history, getting a consolidated loan may prove to be a challenge. This is when it may help you to consider taking out a guarantor loan.
What is a guarantor loan?
A guarantor loan is when you ask a family member or friend to sign on your loan with you. The guarantor is not responsible for the loan payments unless you default on them. If you stop making payments, the guarantor will be held responsible for making your payments. Having a second person sign for your loan, usually, someone with a good credit rating ensures banks and lenders that they are not at risk by providing you with a loan.
If you decide to get a guarantor loan, you need to be sure that you can make the monthly payments. If you default on your loan, your guarantor will be responsible for repaying the money. And if you find yourself unable to make your payments, your credit rating could suffer.
What are the benefits of a guarantor loan for consolidating debt?
You can pay all of your high-interest debt with one monthly payment. If you’re paying a lot of credit card bills each month, you know that it can be challenging keeping all of the bills straight. By consolidating your debt into one payment, you can keep it simple. You will be working to pay down your debt with a clear end date in sight. When you make minimum payments to credit cards, you can be stuck paying them off for many years. A consolidated debt usually has a certain amount of time in which your debt will be completely paid off.
You can improve your credit score. If you make timely payments while working to pay down your debt, you can improve your credit score. You mustn’t be late on your payments. You may be able to get loan approval with a guarantor that you’d otherwise be denied from. Having a guarantor with good credit sign your loan with you can help you get access to loans you may otherwise be unable to obtain. You may be able to borrow more. If you have a guarantor backing up your loan, you may be able to borrow more than you could on your own. However, you do need to be sure you have the money to pay the bill each month.