Financial life takes you on the ride of see-saw with lots of ups and downs. When you are on the upper side, you get everything in a balanced way. You can accomplish every desire and fulfil every need.
When your finances are on the downside, you have nothing but lots of struggles. It is where you seek someone’s help, who can arrange quick funding for you. But, hold on!
From where can you arrange that instant funding? Will you approach your near and dear ones to get some money? Will they assist you or not? A lot of questions are in your mind, and answering them can be tricky for you.
Instead of approaching your acquaintances, you should rely upon the financial marketplace. It is the place where you can have the guarantee of funding help in a quick time. You have the choice of approaching banks or direct lenders. Both are available with their loan options and with certain norms.
It is good that you are going to approach them. Are they available all the time to help you? The answer is no because you first have to fulfil their conditions and then get the approval.
One of those conditions is PERSONAL GUARANTEE.
What is a Personal Guarantee?
The loan process has some obligations to be followed by the borrower. Personal guarantee forms an integral part of it. It is all about giving the lender guarantee of the loan repayment.
As the borrower, you can provide that guarantee by bringing a person as your loan guarantor. The person should have a good credit score and be a homeowner. If you cannot find that person, you have another alternative to provide collateral against the loan. The lender can take possession of your asset if you default in between.
Both the options of guarantor and collateral bring the benefit for longer-term funding. However, there is another alternative of a personal guarantee, which is your monthly income.
The lender gives you the loan approval on the basis of your monthly income capacity. The prime example is payday loans, quick loans and installment loans for bad credit from direct lenders only and no guarantor is needed.
When you provide the personal guarantee of your income, you may not be allowed to fetch a larger amount. Lenders will only provide affordable loan deals that match your repayment capacity.
Ways to Manage Personal Guarantee to get a Financial Help
Providing the personal guarantee is a huge responsibility for a borrower. You should be careful enough while providing this. Some people manage this perfectly, while some fail to do so.
These people struggle to handle the personal guarantee or even decide what kind of personal guarantee you should give.
The below tips are for individuals who are confused about managing the personal guarantee to take out a loan.
- Know your capacity
The first thing that you should do is to recognise your financial capacity. Suppose you are applying for loans on the personal guarantee of your income. Such income should have the capacity to make the repayments.
You should know that lenders are obliged to offer only affordable loans. They do not offer loans beyond your financial capacity. Think twice about the monthly earning and its capacity to make repayments as well as managing expenses.
- Borrow only affordable loans
Your income is working as the personal guarantee of your loan. In such cases, lenders are very tentative about your loan affordability.
Even if you put collateral against the loan, you should not borrow funds more than your repayment capacity. It is a basic rule of getting financial help. If you borrow funds more than your affordability and later cannot make the entire repayments, your personal guarantee cannot do anything.
On the other hand, if you go according to affordability, the lender may further assist you with more relaxation. For instance, you can get a pound 3000 loan with no credit check and no guarantor needed.
- Analyse the value of assets
Applying for the funding help requires collateral. It relieves the lender about the proper repayments from the borrowers’ end. Here, collateral is the personal guarantee.
You should analyse the value of the asset that you are doing to provide for the loan security. You cannot ask for more considerable funding if the value of the asset is less. Therefore, use your personal guarantee in the right way and get funding accordingly.
- Choose only a reliable person as your guarantor
Another personal guarantee is your guarantor. The concerned person is responsible for making the pending repayments if the primary borrower fails to do so.
In such conditions, the reliability of the person matters a lot. He should have a good credit record, and if he is a homeowner, things will be in the lender and your favour.
Therefore, you should search hard to find that person. If you default, the lender will contact your guarantor, who is giving a personal guarantee.
- Approach a financial expert
There is no doubt that such things will confuse you, especially when you are not sure of your personal guarantee. Instead of making errors, you should approach a financial expert who can guide you in this matter.
Doing this practice will bring dual benefits. First, you can have better guidance and use the personal guarantee in the right way. Second, the expert can increase your knowledge on this as you may require a loan in future and give a personal guarantee.
In the Nutshell
Most people often misunderstand personal guarantees. Sometimes, it is connected with guaranteed loan approval, which is not the case. You need to understand this term so that you can manage the loan well with your money lender.
You should decide early whether you want to give collateral, arrange a guarantor, or show income to generate funds. Nothing is complicated if you make the right decision. The best way to do it nicely is to research hard of the financial marketplace.
Another thing is that a personal guarantee increases your financial trustworthiness as well. Lenders will like you as their prospective borrower, and you can have financial assistance without any obstacles.
Therefore, keep up your loan preparation well and get everything in order while facing tough financial times.