You may need a personal loan for your immediate or other cash needs. Unsecured personal loans help one get instant cash for almost any purpose. You can finance small or whopping cash needs without worries. However, some loan providers mandate a guarantor requirement to qualify. It could be due to your low credit history, pending debts or minimal income.
You don’t meet the essential eligibility criteria. Hence, the loan providers may sense risk there. A guarantor helps eliminate any confusion for them. He is a known one who guarantees to pay the dues if the borrower cannot.
However, finding and convincing a guarantor is the hardest part. Like the loan provider, some guarantors require clarity on what one is getting into. No one wants to land in a debt pool, affecting their credit scores.
Hence, ensuring transparency regarding the purpose of the loan and its terms and responsibilities is essential. If you need an unsecured loan with a bad credit history and income, the blog may help you. It discusses the best ways to convince a guarantor of your basic affordability.
Who is a guarantor on a personal loan?
A guarantor is a person who agrees to pay back the remaining loan amount if the borrower fails to do so. He could be a family member or a close friend. Sometimes, individual roommates can also be a guarantor.
One must meet the basic criteria to be a guarantor. Most loan providers require the guarantor to have a good income and credit score. Having a guarantor on the loan helps fetch low interest rates. It automatically reduces the total costs to pay.
A borrower is responsible for ensuring transparency while dealing with a guarantor. He must keep the terms, expectations, and financial requirements upfront. Don’t hide anything from the guarantor. Trust is the prime factor for the long-term loan commitment. Choose the one whom you can rely on with your finances and needs.
How does having a guarantor ease up the deal for you?
A guarantor helps you qualify for the first best loan quote without worries. You don’t need to spend more time finding the right one. Even if you get it, you ultimately pay more. It is because you lack credit and repayment strength. Here are other ways a guarantor makes the deal easier for you:
How to create a persuasive plan to convince the guarantor?
Yes, a guarantor is there to help you out with the payments. However, it will not work until you prepare a convincing plan. Like you, the guarantor needs to know your intentions regarding getting a personal loan. He, too, wants a slight belief that you would be able to make at least half of the payments. Sometimes, you must invest more effort to persuade him to be your guarantor. Think of it this way- Why would anyone guarantee your loan? What’s the catch?
You may be confident of your basic affordability on the loan. You know that you can make the payments until you can. However, your guarantor doesn’t. Frankly, the other person shares every right to know the numbers or figures. It will help him decide whether to continue or reject the guarantor proposal. Here is how you can convince your guarantor:
1) Create a spreadsheet of finances
Knowing your finances will help you understand how much money you need. Creating a spreadsheet of incomings and outgoings is essential. It may help you know the best ways to save for the loan payment. Moreover, you may know whether you need a guarantor at all. Here is how you can create that:
| Income (in pounds) | Basic expenses | investments | Debt payments |
| 40000 | 20000 | 5000 | 15000 |
| 40000 | 25000 (rent increase) | 5000 | 10000 |
| 25000 (income drop) | 7000 | 1800 | 9000 |
Creating a spreadsheet of your current income, outgoings and debts will help. Enter every payment you incur monthly. Keep your spreadsheet beside you. It will help the guarantor understand your monthly loan payment affordability. Moreover, you get to know your potential better.
2) Be open about your earnings
Yes, it is essential to get a loan with a guarantor. While not every guarantor may want to hear that from you, preparation helps. Check your total monthly earnings. They should be valid ones to support your loan payments. Provide a clear overview of your income by providing your salary slip. Don’t do so unless the guarantor asks you to. If asked, provide him with last month’s bank statement. It will help him verify your monthly outgoings with the spreadsheet you prepared.
3) Outline your budget (if expenses exceed income)
If your monthly outgoings exceed income, re-define your budget. Check how you will pay the guarantor back after the loan. Yes, some individual guarantors may demand a clear overview of payments. Some may demand the money back after the loan term ends. Thus, you must have a plan to convince the guarantor there.
You can make space to settle the guarantor’s dues by consolidating existing debts. It reduces your liabilities towards multiple debts. Instead, you only make a single payment to a loan provider. It helps you save money on interest and reduces the overall liabilities. You can use this amount to repay the guarantor.
4) Reveal genuine concern about the guarantor’s finances
Genuine concern is a part of healthy relationships. Unless your guarantor feels a connection with you, he will not help. Thus, apart from discussing your financial problems, know his issues also. It will help him feel better.
Moreover, building strong companionship over loans and life issues is the rule. It would also help the verified direct lender provide a well-educated loan. He explains the terms to both parties. If you share good compatibility, the guarantor will cooperate on the documents or verifications required. He would not leave the agreement in the middle.
5) Highlight the impact on the credit score
Every guarantor-based loan shares some vulnerability on the credit score part. A guarantor’s good credit may help you with credit improvement throughout the loan term. Alternatively, defaulting on the loan or skipping payments affects your and the guarantor’s credit score. Thus, a guarantor would like to know how you would eliminate or reduce this risk for him.
You can do this by ensuring a consistent income and being responsible for clearing debts. The lower the liabilities, the more the reliability. You don’t need to pay all the dues in one day. Instead, you can do that according to your comfort. However, you must do so to keep the guarantor on your side. He should be convinced by your efforts to keep the dues minimal.
Try eliminating every aspect that may hamper the other person’s financial well-being. Check whether the creditor provides the facility to pre-pay the amount. If yes, you can use the sudden lump sum you get from the lottery or inheritance to pre-pay the dues. It also reduces the guarantor’s liability.
Bottom line
Thus, planning before contacting someone to be your guarantor is essential. It helps you better understand your finances, loan payment potential, and credit score. You can take active initiative to improve the money management to convince the person. No one wants to guarantee someone who cannot pay the dues ever.
Thus, reveal your best potential to meet the bare minimum without obstacles. Valid income and expense proof may help you get a reliable guarantor on personal loans.
