A Personal loan is one of the most flexible and affordable forms of financial solution offered by non-banking financial institutions and banks. It is easy to get a personal loan with a low personal loan interest rate and high eligibility. However, there are many that either lack a good credit score or an impressive income. A guarantor loan is a great solution that works in favor of the individual without any credit eligibility. This has been a prevailing solution taken by individuals with zero to low credit eligibility.
What is a guarantor loan?
A guarantor loan is a personal loan that is granted only in the presence of a guarantor with a good credit score and a good income. When individuals face rejection, they can make someone act as a loan guarantor with good eligibility to take the guarantee of loan repayment. The loan providers offer loans based on the guarantor. The loan guarantor will take equal responsibility for borrowing and share the damage equally if there is a default. Before you become a guarantor for someone, you must consider all the drawbacks.
Drawbacks to loan guarantor
● Damage credit score: A loan guarantor will damage his own credit score when the borrower will not pay or delay any EMI payments. If you have worked on your credit score, you will lose it just because someone else does not make timely payments. This damage will affect your credit record as your credit report will also have the same report. It will become difficult to get a low personal loan interest rate with a bad credit score.
● Unable to borrow: When you act as a loan guarantor, that loan gets added to your credit history and report. You do not enjoy the money, but you take up the responsibility. However, this becomes worse when you face an emergency. You will not be able to borrow, as you already have an existing loan being taken by someone else. Your doors and opportunities for borrowing are restricted for the entire loan tenure.
● Damage to savings: If the borrower is not able to pay the loan within the tenure, it becomes your responsibility. You are the guarantee of repayment. The loan provider will directly approach you about the repayment. You can not ignore it or you will default and your credit score will be damaged. So, you pay for the loan taken by someone else using your hard-earned savings or investment.
Read More: Why are NBFCs Preferred Over Banks for Personal Loans?
Wrapping up
The reality of a online personal loan in terms of guarantor loan is not an easy one. The reality is very different and has a lot of drawbacks for the guarantor. If the borrower is unable to take financial responsibility, you lose your credit record. It has become difficult for you to get a low personal loan interest rate, at least for a good number of years.
No comments:
Post a Comment