Short term loans are of immense benefit especially if you want to use the cash for a short period of time and if the necessity is an unexpected one. However, it has also been observed that these loans that are extended for a limited time period might also attract a very high rate of interest.
Keeping aside the various aspects of a loan like rate of interest, Annual Percentage Rate (APR), cost of the loan, loan term, and repayment schedule, there is another aspect that you must take into account and that is whether or not you require a guarantor. So, you must have heard individuals asking lenders questions like “Can I apply with no guarantor”.
Short term loans and guarantor – Do you need one?
Generally speaking, most short term loans usually don’t require you to introduce a guarantor. However, if you have a poor credit history or if the amount of loan money you are looking forward to is quite high, it is best to opt for a loan by furnishing details of a guarantor.
In this way, you stand a better chance to qualify for a loan. Also, if your requirement is higher, a short term lender may not be willing to work with you without security especially if you don’t have a very good credit history to boast about. Prior to delving deeper into the subject, you must understand who a guarantor actually is.
Who is a guarantor?
He is basically an individual that has agreed to repay the loan amount in the event the loan applicant fails to repay the loan or defaults in making the loan repayments for a prolonged period of time.
Terms and conditions differ between lenders
The terms and conditions or the fine print that will make you sign on the dotted line when you apply for a short term loan will be different for different lenders. In majority of the cases, it has been seen that guarantor loans are usually opted for when the credit history of the applicant is not so good. Usually a guarantor is a friend, or a family member or a close relative whom you can trust. Also, the guarantor must be financially stable to take on the responsibility before he signs on the dotted lines.
When are guarantor loans required?
As mentioned above, a guarantor loan will be required for loan applicants that will require higher value loans or has bad credit score. However, not everyone can qualify as a guarantor. You must be eligible to be a guarantor. Few of the requisites of an eligible guarantor include the following-
- The guarantor must have a strong credit history
- He must be a homeowner
- Should have a steady income
- Must be employed on a permanent basis
- Most importantly, the guarantor must have been associated with the loan applicant for a long time
Are there guarantor loan alternatives?
There are many options that can be regarded as alternatives to guarantor loans. But you can be rest assured that if short-term loans are what you are opting for, you may not require a guarantor. Since the loan amount is not very high in case of short-term loans, the risk involved in the deal is not very high.
If you are uncertain about the type of loan that will suit your needs the best and you are not being able to decide the pros and the cons of each loan, seeking advice of a professional is perhaps your best bet. However, prior to settling for the loan, make sure you check the credibility of the lenders and settle for a lender only after checking the past track record and comparing the cost of the loans with other service providers.