Recently, it was announced that consumer borrowing in the UK had experienced its strongest increase since February 2006, which was before the sub-prime mortgage collapse and the great recession. According to the Bank of England’s (BOE) Money and Credit report for September, borrowing showed an increase of 8.2% amid falling interest rates and increased consumer confidence. This rise is also been driven by a rise in the number of lending options available to consumers, with guarantor loans currently among the most popular.
3 Attributes to look out for in a Guarantor
This arrangement offers borrowers access to considerable funds. All that borrowers require is a verified guarantor to support their application, and this individual must meet the lenders criteria and be willing to assume responsibly for repaying the loan should the account holder default.
With this in mind, borrowers must be careful when selecting and approaching a preferred guarantor. Here are three crucial characteristics that you should look for in such a person: –
1.Good organisation and money management skills
Each guarantor must be vetted by a prospective lender, and there is no way of knowing for sure if an individual will be accepted. Only those with a viable income source and a strong credit record will be considered, and while your guarantor may not wish to share such personal information with you there are other ways that you can gauge someone’s suitability. If people are organised and have strong money management skills, for example, it is likely that they repay their bills on time and have developed a strong credit score over time.
2. A Strong sense of curiosity
They say that curiosity killed the cat, but this is a crucial and underrated attribute for potential guarantors. After all, after approaching someone close to you and asking them to act as a guarantor, their willingness to help may solicit an instant response that is based on kindness rather than knowledge. It is unwise for any guarantor to enter into an agreement without a comprehensive understanding of what is required, no matter what your predicament or how keen they are to help. Good guarantors must therefore engage with the process fully and learn about their responsibilities, before making an informed decision for the long-term benefit of your existing relationship.
3.An Understanding of risk
Clearly, the presence of a guarantor who is also a friend or relative will drive you to manage your finances carefully and repay your debt on time. Events can often spiral out of your control, however, creating an unfortunate scenario where you are unable to make monthly repayments. This is a potential risk of all loan agreements, and every guarantor should have a full understanding of this and the consequences that they will face as a result. With keen appreciation of risk and reward, guarantors can prepare for the worst-case scenario without damage being done to a long-term friendship.