In this day and age, it’s getting harder and harder to get by, never mind save for the likes of a house deposit. If you combine this with rising house prices then it’s almost impossible to climb the property ladder. So we are going to be talking about a possible solution to this issue, loans with a guarantor.
However, there is a way to tackle this problem, one such solution includes asking your parents, a friend or a close relative to act as guarantor.
What is a guarantor?
A guarantor is someone who is happy to take over your debt if you suddenly become unable to pay it. Such an individual can be used to apply for guarantor loans, credit cards, leases, insurance and various other loan-related products.
Who can act as my guarantor?
Most individuals will ask their parents to act as a guarantor, however, a guarantor is generally an adult who owns their own property. Such an individual must also have a good credit history.
What to do prior to enquiring about a guarantor
There are a number of factors to consider prior to asking a guarantor to help you with a loan. Such factors include printing out copies of your recent financial statements, your credit reports and making a list of all the people you know that may be able to help you out and could act as a prospective guarantor. Once you have this in place, only then should you begin to arrange meetings with the individuals involved.
By getting your parents to act as guarantor, you won’t have to pay a deposit at all. Instead, the equity on their property is used as security against your loan. Another advantage to this solution is the fact that you may also save on mortgage insurance expenses.
The risks involved
When considering this type of loan, it’s important to become aware of the risks involved, as if you’re unable to pay up, your parents will be left to front the bill. This could even mean them losing their property.
Building up equity of your own
Once you build up equity of your own, you can then remove the guarantor. However, until then, the risks remain.