A personal loan is one of the best financing tools that you can use to meet any kind of financial need. Today availing a personal loan has become easier than ever. You just have to download the best loan app and apply for the loan.
However, you need to meet a handful of eligibility criteria set by the lender to qualify for a personal loan of your desired amount. In case, you want a higher loan amount or better loan terms, then you can consider adding a co-borrower or a guarantor to your online loan application. You can also consider adding a co-borrower to your application if your credit score is poor.
Read on to understand the role of a guarantor in personal loan approval. But before that let’s understand who can be a guarantor.
Who Is a Guarantor?
A guarantor is a person who agrees to repay the loan in case the borrower is unable to make the payments. The role of a guarantor is to provide an additional layer of security for the lender in case the borrower is not able to make the repayments. The lender will look at the guarantor’s creditworthiness and their ability to repay the loan.
A guarantor can be a close family member who has a good credit score and a stable income. They should be willing to take the risk of guaranteeing the loan and make the repayments in case the borrower defaults.
Can a Guarantor Increase My Chances of Getting a Personal Loan Approved?
Yes, having a guarantor can increase the chances of getting personal loan approval. A guarantor is a person who agrees to take responsibility for the loan repayment if the borrower defaults on the loan. Having a guarantor assures the lender that there is someone who can cover the loan repayments in case the borrower is unable to do so.
This reduces the lender’s risk and increases the chances of loan approval. However, as we mentioned earlier, the guarantor must have a good credit history and meet the lender’s eligibility criteria. In case, both the primary borrower and the co-borrower fail to repay the loan, both credit scores will be impacted.
How Does a Guarantor Help You in Obtaining a Personal Loan?
There are multiple ways in which a guarantor can help you get an online loan, that too at a low rate of interest. Here are some of the reasons why having a guarantor helps you in getting your loan approved:
- Boost Credibility: A guarantor with a strong credit score can boost your chances of loan acceptance. To estimate the risk of default, the lender would look at the guarantor’s credit score and income.
- Ensure Safety: In the event of default, a guarantor can promise the lender that the loan will be repaid. This lowers the risk of lending and improves the chances of loan approval.
- Boost Income: Since the lender considers the income of both applicants, the overall income might go up if the guarantor has a steady salary. This also increases the likelihood of a higher-loan amount.
- Reduce Interest Rates: Good credit score and higher cumulative income reduce the risk associated with your loan. Thus, the lender may offer you the loan at a reduced interest rate.
How to Apply for a Personal Loan With the Help of a Guarantor?
Follow the steps given below to apply for an online loan on the best loan app with the help of a guarantor.
- Choose a Trustworthy Lender: Do some research and comparison to find the right lender for you.
- Check the Lender’s Eligibility Requirements: Verify that you fulfil the lender’s eligibility requirements.
- Decide on a Guarantor: To support your loan application, get a guarantor who is financially stable and has a solid credit score.
- Provide Required Documentation: To support the loan application, you and your guarantor must both submit the required personal and financial documentation.
- Fill Out the Application Form: Enter all information in the loan application form, including the guarantor’s details.
- Application Submission: Once the application is finished, send it with all the necessary supporting documentation.
- Wait for Approval: Hold off on getting your loan application approved by the lender. Depending on the lender, the approval process may take between 1 to 24 hours.
- Obtain the loan: After your loan has been accepted, you will get the money and may start repaying the loan as per the terms and circumstances set out.
Having a guarantor can increase the chances of approval for an online loan, especially for individuals with a poor credit score or no credit history. However, it is crucial to remember that being a guarantor carries certain responsibilities. The guarantor should only offer to guarantee the loan if they are confident in the borrower’s capacity to repay it.