A guarantor loan is a special type of loan where the loan is secured by a guarantor. A guarantor is a person who is willing to take the risk of the settling the loan is the person given the loan does not pay. The guarantor must be a person with assets that can be sold to pay up the loan. The nature of such loan is a low-risk low return. They don’t attract a high-interest rate because they are not risky loans. Getting a guarantor loan is not an easy task. There are steps and procedures that one have to put into consideration before taking the loan. This is a guide to getting a guarantor loan.
Find a reputable guarantor
The first step is to find a reputable guarantor. The amount of loan to be given will be based on the ability of the client to pay and the reputation and wealth of the guarantor. The guarantor should be a reputable person in the community. In most cases, the guarantor should be a close friend or a family member. The guarantor should be willing to take up the risk. One should be able to convince the grantor that he has the ability and will to pay the loan. The best person to look out for is a person who has been a guarantor in other places. It should be noted that the guarantor has the freedom to withdraw his services at will. In case the person is declared bankrupt, he cannot continue serving for the loan.
Contact the best lending institution
The second step is deciding on the lending institution you are going to ask money from. The most common lending entity is a bank. There are other institutions like the Sacco, cooperative and international banks. If one is a member of a Sacco, loans from the institution are the best as they attract less interest. However one has to be an active member and saved for more than a year. Decide on where to borrow your money from. Approach the institution to understand the terms and condition of the loan. The loan repayment policy, fines, and penalties attached to late payments. Get to understand whether they will accept the guarantor of your choice. If they reject your choice, ask them of the reason and try to look for another person who can meet the requirement.
Plan the repayment schedule
If you reach an agreement with the lending institution, before taking the loan, plan the repayment schedule. Try to see whether your income can service the loan. Consider if the loan has a grace period before maturity of the repayment period. Cut on unnecessary expenditure to raise more fund to repay the loan. If the loan was used for an income generating project, the proceeds from the project could be used to repay the loan. Interest on the loan is not taxed. One should claim the allowance from the tax officials. If all is set, apply and take up the loan.