{"id":359208,"date":"2021-02-01T14:05:21","date_gmt":"2021-02-01T21:05:21","guid":{"rendered":"https:\/\/www.creditrepair.com\/blog\/?p=359208"},"modified":"2021-02-01T14:05:22","modified_gmt":"2021-02-01T21:05:22","slug":"what-is-a-guarantor","status":"publish","type":"post","link":"https:\/\/www.creditrepair.com\/blog\/credit-101\/what-is-a-guarantor\/","title":{"rendered":"What is a guarantor on a loan?"},"content":{"rendered":"\n
\"\"<\/figure>\n\n\n\n

Like the name suggests, a guarantor\u2019s main function is to guarantee something. A guarantor on a loan will cover the loan payments if the borrower defaults. Think of this person as a safety net: If you take out a loan and something happens that results in you being unable to pay it back, a guarantor will front the loan instead.\u00a0<\/p>\n\n\n\n

Being a guarantor or having a guarantor on a loan comes with a host of considerations, an important one being how it affects your credit score<\/a>. This guide will go over what it means to be a guarantor on a loan, specific qualifications to become a guarantor and the benefits and pitfalls of having and being a guarantor.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

What does it mean to be a guarantor on a loan?<\/h2>\n\n\n\n

A guarantor on a loan acts as insurance in case the primary borrower defaults. This person will have to front loan repayment plus the loan interest<\/a> if the borrower cannot. This is a huge financial obligation, and one that shouldn\u2019t be taken lightly.\u00a0<\/p>\n\n\n\n

When you become a guarantor, you\u2019re required to pledge your own assets that could be seized in the event the person borrowing defaults. And if you don\u2019t have the means to repay that loan, then your car, house or other collateral could be repossessed by the lender.<\/p>\n\n\n\n

This is a scenario you don\u2019t want to find yourself in. So before you promise to become a guarantor, examine this decision like you\u2019re the one actually taking out the loan. Understand the loan contract and your financial bandwidth, and limit emotional decision-making, which might cloud the situation. <\/p>\n\n\n\n

Despite the financial responsibility of being a guarantor, it\u2019s a generosity that could help the borrower tremendously, especially if they\u2019re a close friend or relative. People often need a guarantor if they have a short credit history or if a lender deems a borrower too risky because of bad credit or previous defaults on a loan. In these scenarios, getting a guarantor may be the best way to secure a loan.<\/p>\n\n\n\n

Who can qualify as a guarantor?<\/h3>\n\n\n\n

Signing up to be a guarantor takes some legwork. There are some requirements put in place to ensure the lender gets paid back. Mainly, these are indicators of financial responsibility, including your credit score. Here are the most common requirements necessary to become a guarantor on a loan in the United States:<\/p>\n\n\n\n