A guarantor loan is available to Americans that have a friend, family member, or someone else who trusts them to make repayments on this loan. These types of loans are typically up to $10,000 and may have higher than average interest rates, because they are given to borrowers that are considered risky by lenders, due to their credit rating and past financial history.
A guarantor loan is an installment loan that you can borrow and repay over time if you have someone to cosign your application, such as a trusted family member or friend. Typically, these loans are for $10,000 or less and they come with higher interest rates than other credit products because people who apply for them often have bad credit or spotty financial histories that prevent them from qualifying for regular personal loans.
If an immigrant has no credit or a low credit score in the United States, banks/lenders require a person who can take responsibility in case of a failure to repay the loans. This person is known as a guarantor.
The guarantor must be a U.S. Citizen or permanent resident with high credit scores. This provides peace of mind for lenders who are worried about losing funds. Sponsors can be friends, family, or co-workers.
In guarantor loan, As an additional security measure, the bank/lender holds someone accountable to the principal applicant (primary borrower) in the event of a loan default. The credit rating of the guarantor plays an important role in determining whether to grant a loan to an applicant with a poor credit rating.
The guarantor is only liable if the principal applicant fails to repay the loan.
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