Are you in need of a quick loan but need help meeting the requirements of lenders? There’s a type of loan that’s right for what you need: guarantor loans.
These loans are a popular option in Australia for those with a low credit score, are self-employed, or want a loan with a guarantor and no credit check.
Let’s explore what they are, the different types, and their pros and cons.
What this article covers:
- How Does a Guarantor Loan Work?
- Types of Loans with a Guarantor in Australia
- Pros and Cons of a Guarantor for Loan
- Here’s How to Get a Guarantor Loan Easily
How Does a Guarantor Loan Work?
It is a type of loan where a third party, often a family member or friend, agrees to be responsible for the repayment of the loan if the borrower cannot.
Essentially, the guarantor provides security for the lender, making it easier for the borrower to get approved for the loan. They are usually unsecured, which means the borrower doesn’t have to put up any collateral to secure the loan.
Types of Loans with a Guarantor in Australia
There are two types: limited guarantee and unlimited guarantee. Let’s dive into these two types of loans so you can make an informed decision:
Limited
With a limited guarantee loan, your guarantor is liable only for a certain loan amount. For example, if the loan is for $20,000 and the guarantor agrees to a minimum guarantee of $10,000, they will only be responsible for the repayment if the borrower defaults.
Unlimited
This loan obliges your guarantor to cover the entire loan amount if you default. It is a riskier option for the guarantor, but it also means that the borrower may be able to access a larger loan amount.
Pros and Cons of a Guarantor for Loan
Before you get a loan with a guarantor, note that they have pros and cons. Weigh these well before you make a decision:
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Easier Approval
They are easier to get approved for than other types. Remember that the lender is more likely to approve a loan if a guarantor provides security.
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No Collateral Required
They are usually unsecured, which means the borrower doesn’t have to put up any collateral to secure the loan.
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Lower Interest Rates
Since the loan is less risky for the lender, the interest rates on guarantor loans are often lower than other loans.
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Risk for the Guarantor
The biggest risk is that your guarantor will have to cover your debt if you default. The guarantor’s credit score could be affected if the borrower cannot make payments. If the borrower cannot make payments, it can strain the relationship between the borrower and the guarantor.
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Limited Loan Amount
Loans that need a guarantor are usually unavailable for large amounts, which may not be sufficient for the borrower’s needs.
Here’s How to Get a Guarantor Loan Easily
There is no such thing as a guaranteed instant approval cash loan, but you can get as close to that as possible if you follow these steps:
Step 1: Find a Guarantor on Loan
The first step in applying for a loan with a guarantor is to find someone guaranteeing a loan for you. This person will agree to repay the loan if you cannot. The guarantor for a loan should have a good credit score and a stable income.
Step 2: Gather the Paperwork
You must provide identification documents, proof of income and address, information about your guarantor, and other financial details. The lender needs these documents to verify your identity and establish whether you meet the lender’s eligibility requirements.
The exact paperwork requirements may vary depending on the lender but typically include a passport, driver’s license, or birth certificate for identification, recent pay stubs or bank statements for income verification, and details about your assets and debts.
Be sure to check with the lender beforehand to speed up the loan application process.
Step 3: Choose the Loan Type Lender
You’ll need to choose the type of guarantor loan that suits your needs (limited guarantee or unlimited guarantee). Once you’ve found a guarantor and chosen the type of guarantor loan, it’s time to choose a lender.
Many lenders offer guarantor loans in Australia, so it’s important to research to compare different lenders’ interest rates and fees.
Step 4: Apply for the Loan and Wait
To apply for these high-acceptance loans, go for guaranteed loan approval online. You and your guarantor must provide the lender with certain documents, such as proof of income, identification, and bank statements. The lender will also perform a credit check on you and your guarantor.
Once the lender establishes your eligibility for your guarantor loan, you should be safe. Depending on your lender, you can expect a guarantor loan the same day or several days after approval.
Wrapping Up
Guarantor personal loans in Australia are viable for those struggling to get approved for other types of loans. They are easier to get approved for, require no collateral, and often have lower interest rates.
However, they also come with risks, such as the strain they can put on relationships and the potential impact on the guarantor’s credit score. It’s essential to carefully consider the pros and cons of a guaranteed personal loan before deciding if they are the right option for you.
Was the guide helpful? Check out these extra resources to delve deeper:
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- How Do I Get Loans ASAP?
- Urgent Loans: The Need-to-Know
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- How to Get Loans in 5 Minutes
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- Why You Should Get a Quick Finance Loan in Australia
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