How to Get A Guarantor Loan in CanadaBy Lisa Rennie in Loans
There are certain expenses in life that are far too great for our bank accounts to handle. Whether it’s buying a house, a car, or even paying for a home improvement project or a big family vacation, expenses like these can be pretty hefty. In these scenarios, taking out a mortgage, auto loan, or personal loan can help provide us with the funds needed to cover these expenses when our own finances aren’t adequate enough.
But what if you can’t get approved for a loan? What if your credit score is too low or your financial history is a little shaky? What will you do if your lender says no?
If you find yourself in this situation, you may want to consider a guarantor loan. This type of loan requires a guarantor to co-sign on the loan contract. Basically, the guarantor backs up the loan and promises to take over payments if you ever default.
Want some more information about guarantor loans? Read this.
How to Find a Guarantor to Co-Sign Your Loan
If you are unable to get a loan on your own, finding a guarantor to co-sign on your loan with you can be just enough to convince your lender to approve your loan application. But finding the perfect individual to act as a guarantor can be a bit of a challenge. You can’t ask just any person, as not everyone will necessarily be able or willing to accept this role.
Being a guarantor is a big responsibility. This person has to rely on you to follow through with your payments, or else they will be on the hook to take over payments for you. That’s a big gamble for them to take if you are unable to prove that you’re financially capable and responsible enough to repay the loan on your own.
Thinking about becoming a loan guarantor? Here are the requirements.
When picking a guarantor to co-sign on your loan, be sure to choose a trusted friend or family member. Not only is the guarantor taking a risk, but you are too if you don’t select the right person. Ideally, the guarantor you pick should be one who is already very responsible with their own finances and loans, has a track record of making timely payments, and a healthy credit score. At the end of the day, the trust goes both ways.
Always Think About The Future
Consider the implications of what will happen if you are unable to make one or more of your payments at some point down the line. Or think about what could happen if you’re no longer able to repay the entire loan. While you may be in a good financial position right now and are able to make your payments, consider what would happen if you lose your job, take a pay cut, suffer an injury, or medical condition that can make it impossible to work.
Anything can happen, as life can throw us a curveball when we least expect it. Consider the potential ramifications of not being able to follow through with your payments and how that could affect the guarantor and your relationship with this person.
Check out this infographic to learn about the true cost of borrowing.
Choose a Lender Who Specializes in Guarantor Loans
Not all lenders provide guarantor loans, so it’s in your best interests to find a specialized lender. Conventional lenders are not in the business of providing guarantor loans, nor do they typically provide bad credit loans to those with poor credit scores. For this reason, you’ll have to do some research to find a lender who deals specifically with subprime borrowers who need some sort of assistance getting a loan with the help of a guarantor.
Trying to compare lenders in Canada? Read this first.
That said, it’s important to be wary of the type of lender you work with. Some lenders in the subprime lending sphere may not have the borrowers’ best interests in mind, which can put both you and your guarantor in a precarious position if you’re not careful. It’s not uncommon for borrowers with a poor credit history to get scammed from lenders without even realizing it until it’s too late.
You can get a sense of whether or not a lender is shady right off the bat if they promise to approve your loan without even looking at your credentials or the credentials of your guarantor. Steer clear of lenders who make these outrageous promises.
For more ways to spot a loan scam, watch this video.
Reasons Why Someone Might Need a Guarantor Loan
There are plenty of reasons why you might have trouble getting approved for a traditional loan and may have to resort to a guarantor loan:
- You have bad credit
- You don’t want your credit report pulled
- You can’t get approved for the loan amount you need with a conventional loan
- You want to get a lower interest rate with the help of a guarantor
Anyone of the above-mentioned scenarios can put you in a position to take advantage of what a guarantor loan can offer you.
Wondering how lenders set their interest rates? Find out here.
No Credit Check Needed
The great thing about getting a guarantor to cosign your loan is that your credit score won’t be taken into consideration. This why this type of loan is such a great option for many Canadian consumers who are dealing with bad credit or other financial issues.
Interested in more information about your credit score? Click here.
What Happens If I Can’t Find a Guarantor?
If you’re looking to apply for a guarantor loan, you need to find someone who is willing to be your guarantor. Whether it’s a lifelong friend of a close family member, it’s up to you to find someone. As mentioned before, you’ll need to do your due diligence to make sure you choose the right person, even if you have people in your life who are willing to step up and be your guarantor. But not everyone will necessarily be qualified to take on this role.
If you can’t find a guarantor, it may be in your best interest to seek out another form of financing. Depending on the reasons why you want a guarantor, here are some alternative options:
- Bad credit lenders – These alternative lenders deal specifically with borrowers who have bad credit and place more weight on other factors when approving a borrower for a bad credit loan, such as income and employment status. Click here to find out what bad credit lenders look at when assessing loan eligibility.
- Credit improvement products – You may want to give your credit a boost in order to increase your chances of getting approved for a conventional loan in the future. There are credit improvement products available out there that can help you improve your credit score for this purpose.
- Debt relief services – If you’re drowning in debt and are having a tough time digging yourself out of a financial hole, there are debt relief services available that can help you effectively reduce your overall debt and free up more of your money that would otherwise have gone towards paying off your high-interest debt.
- Credit counselling – If you’re unsure about what to do to improve your credit, you can work with credit counselling services that will educate you on what you need to do to improve your situation.
Still trying to decide if a guarantor loan is right for you? Check this out.
Get the Guarantor Loan You Need Today
If you’re in need of a loan but can’t get one on your own, guarantor loans may be a viable option. To help you find the right guarantor loan and work with a reputable lender, be sure to get in touch with Loans Canada today!