Guarantor Personal Loans
Can’t get approved for a personal loan? Consider a guarantor personal loan
If you’re finding it tough to get approval, then using someone more established as a guarantor on your personal loan is another option you have available.
During every loan application, the lender weighs up your ability to manage repayments and your overall risk of default. This is done by checking income via your employment and any assets you may have.
If you don’t meet their requirements and have your loan application rejected, a guarantor may shift the outcome in your favour.
A guarantor will act as security by also becoming legally responsible for loan repayments if you default. Using a family member or trusted friend are popular options, but there are obvious risks to not only their finances, but your friendships as well.
In the guide below, we help you understand the ins and outs of guarantor personal loans from both the perspective of a borrower and the guarantor.
Personal loan types available with a guarantor
The first thing that needs to be made clear, is that there’s no separate loan option specifically called a guarantor personal loan. Placing a guarantor on your loan application is simply a feature to help you gain approval for each of the traditional loan types.
Let’s go over the 2 major loan types you have available and why you may apply for each with a guarantor:
- Secured personal loan: If you’re looking to buy a physical asset such as a car, then a secured loan is a popular option. Having an asset that you and your guarantor can offer as security reduces the lender’s risk and you’ll likely receive a more competitive rate.
- Unsecured personal loan: When looking to borrow for things such as a holiday or the like, an unsecured loan is a more likely choice. When it comes to unsecured personal loans, your guarantor can’t offer an asset as security and therefore this extra risk will mean repayments are higher. They are however, much more flexible.
Acting as guarantor on a personal loan
If you’re certain that a guarantor personal loan is the right option for you, there are a few eligibility requirements that both the borrower and guarantor will have to meet.
To be eligible for a guarantor personal loan in Australia you’ll be required to meet the following:
- You’re at least 18 years old.
- You’re an Australian citizen, permanent resident, or hold the required visa.
- Have a verifiable income.
- Have a good credit rating.
In order to verify the above criteria, both the borrower and guarantor are going to need the following documentation:
- Drivers license/passport as proof of identity.
- Income statements such as your payslips.
- If retired, you’ll need to prove income from investments. If self-employed, you’ll need your business tax returns.