Is it a good idea to be a guarantor?
Almost anyone can be a guarantor. It’s wise to just buy a guarantor for someone you trust and you think you can trust their money with. You must be over 21 years old, be financially stable and have a good credit rating to be a guarantor. In a broad sense, a guarantor is a person who co-signs (guarantees) a debt incurred by another person and states that they will make the payments and fulfill the borrower’s obligations if they no longer pay.
In practice, guarantors are most often used for jointly signing lease agreements and loans for borrowers with credit or income restrictions. Here’s why you might need a guarantor, what qualifications they need, and whether it’s a good idea to use one. A surety loan allows people with poor credit scores to secure their repayments, making it a great option for those with bad credit. It is also commonly used for people with low or no credit history, such as. B. for young adults who buy their first home.
A guarantor is another word for co-signer, and by definition, a guarantor is someone who guarantees that they are legally responsible for paying the rent under the lease, but only if the tenant is unable to pay for one reason or another. A guarantor guarantees payment – pretty easy to remember, isn’t it? The guarantor signs the rental contract with the tenant and assures the property manager or landlord that the rent will be paid if you (the tenant) are in default of payment. A guarantor is not always required, but there are circumstances where tenants may need to be approved for an apartment. Or, as an example of an income-based guarantor, say a 22-year-old has just graduated from college and wants to get his first apartment close to where he works.
Believe it or not, it’s apparently common for colleagues to act as guarantors, but not necessarily advisable, according to experts. For this reason, guarantors are sometimes asked to prove that they are in work or have sufficient assets (e.g.. B. a property) to cover the entire amount of the loan or mortgage owed. Similarly, Burke says, employers sometimes agree to act as a guarantor for employees, which creates a risky financial scenario, to put it mildly. It is very important that the guarantor reads and understands the lease agreement and knows the full amount (based on the time covered) that they are responsible for repaying.
If you need to use a guarantor for income purposes, they must have sufficient income to pay the obligation they co-sign for in addition to all their own obligations. He or she could therefore bring a guarantor who happens to have sufficient creditworthiness to take advantage of the promotional interest rate. Lenders perform a series of checks before approving a guarantor loan to determine whether the borrower or guarantor can repay the loan. Before you agree to be a guarantor, it’s very important that you and the tenant or borrower can really afford to keep up with any repayments.
There are both good and bad points to consider when you either take out a surety loan or decide to become a guarantor for someone else. If you miss rent payments, your guarantor may not only be asked to remit these payments, but their credit score can also have a devastating impact, depending on how behind you are. They want proof that the guarantor can afford to pay any rent that is not paid by the tenant for the entire term of the lease in addition to the usual expenses. It is therefore important that you have insured your guarantor and made them feel that you were guaranteeing your rental agreement.
If you don’t have someone close to you who is willing to sign with you, you can instead pay for a guarantor service to sign with you. To be a guarantor, you must be over 21 years old and have a good credit rating and financial stability.