December 27, 2016, 2:03 pm

Factors To Consider Before Taking A Guarantor Loan

by: The Financial Blogger    Category: Banks and You
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As the best alternative to other loan types, a Guarantor loan may help you achieve your financial goals or get out of a financial mess whenever you want. It has been used by many people to achieve either of these purposes.

However, there are some important factors you must consider before you fill out a Guarantor Loan application form. Consider these few factors:

  • Do you have a justifiable reason for taking the loan? While this may seem needless, taking a loan for what you want rather than what you need is a good recipe for a financial mess. If what you want to take the loan for is not a necessity, you should consider other alternatives. For instance, do you want to take the loan for something important like buying a house or for a luxury such as going on vacation?
  • What effect will it have on your monthly expenses? This is a pertinent question of a good importance if the purpose of taking the loan is for frivolities such as taking an expensive cruise around the world. If what is left after paying your monthly bills is insufficient to take care of your monthly repayment, you should consider a better alternative.
  • How will it affect your credit score? The status of your credit score is of significant meaning to you. It will determine your eligibility for future loans or otherwise. That emphasizes the importance of considering the possible impact of taking this loan on your credit score. If you can pay without hitches, your credit score will be impacted positively. If you fail in your repayment for some reasons, your credit score will take the hit.
  • Are there any hidden charges? If there are hidden charges you are unaware of while taking the loan, you may have to spend more than you actually plan for. The extra hidden charge may stretch your budget beyond your ability to keep up with your monthly repayment. If you want to prevent ignorantly taking a loan with hidden charges, carry out a good background check on the lender.
  • Check the APR. Different lenders implement different Annual Percentage Rate. The APR is sometimes considered by some people to be very high. Since you want to take a loan without collateral, you should expect this high APR. Think about it. Can you really afford the high APR without impacting your budget and domestic expenses negatively?
  • How will it affect your relationship with your guarantor? Remember, your guarantor is either a member of your family or a close associate with mutual trust. Think of the possible consequences of failure to make your repayment as at when due on that cherished relationship.

Many people went into taking a Guarantor Loan without enough information to help them make the right decision. Here are the possible questions and useful tips that will play an influential role in deciding whether to go for this type of loan or not. Whatever you decide, work towards prompt payment to save your guarantor the embarrassment of making involuntary loan repayment for you.

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