There are certain eligibility requirements before you can become a guarantor. First, you need to be between 23 and 72 years of age for the application to get approved. You need to be earning sufficient income and must have good credit rating.
The concept behind a guarantor loan is simple. The borrower has poor credit and couldn’t demonstrate good repayment behavior themselves, which is why they will need a third person who will guarantee that they can make payments on time, no matter what their credit says about them.
However, in return, the person acting as a guarantor must have good credit. This is to give lenders the assurance that they will shoulder the payments if the borrower escapes their responsibility. If both the applicant and the guarantor have poor credit, no loan could ever be granted.
Proof of Identity
Of course, you also need to prove that you are who you say you are. Valid proofs of ID include any professional or national ID, driver’s license, passport, and other government issued ID’s containing your complete name, photo, and signature.
Proof of Income
For a guarantor loan to exist, both the borrower and the guarantor must be earning decent income that will suffice for the loan repayments. The borrower must demonstrate ability to pay back the loan, and the guarantor must demonstrate affordability to shoulder any remaining balances as necessary.
Proof of Address
In any type of loan, the lender will always require proof of address, so that whatever happens, they will always know where to track the borrower if they fail to make repayments. In the case of a guarantor loan, the lender will require proofs from both the borrower and the guarantor. Proof of residence you can submit can be your utility bills showing your address.
Relationship with the Borrower
Another thing that the lender would like to confirm is your relationship with the borrower. They need to see strong enough ties as to why you would agree to become their guarantor, and why the borrower is sure to make payments.
However, there are certain limitations for being a guarantor. While the guarantor is ideally someone with strong connections to the borrower, the two must not be financially involved. The borrower cannot have their spouse or partner as their guarantor, and they must not be living in the same household together.
Not all lenders require that the guarantor is a homeowner, but in most instances, the application for a loan is more likely to be successful if that is the case. While the lender won’t necessarily require you to put down your home as collateral, this gives them more security that you’ll be more capable of covering for the borrower’s shortfall if the need arises.