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Things to Check Before Applying for a Gurantor Loan
Finding a gurantor loan is easy; getting accepted is a different issue. While it's true that there are many lenders over the Internet alone, each has its own set of criteria that you should meet to avoid rejection. But even if their requirements are posted online, there's really no way to know if your loan application will be granted or not.
However, you can consider these tips before you hit "apply" to increase your chance of getting approved:
Check Your Credit Score
For most employers, having a good credit score is important because it means that you’re responsible for repaying the debt on time. On the other hand, if you have a poor credit remark, it might suggest that you have defaulted on a loan, have missed a payment, etc.
Check Your Source Of Income
Are you a regular employee or you’re just working on a part-time basis? Some lenders may require you to have a stable job while others may accept you even if you’re self-employed or just receiving a pension, benefits, and the like.
Check Your Monthly Income
Some lenders have a minimum income requirement and this may depend on the kind of loan you want to borrow and the amount. Like your credit score, income is one of the basic requirements because it’s one way to determine if you can settle the loan back on time or not.
Check Your Collateral
Some types of credit, especially the ones offered by banks, will require you to pledge collateral in order for your loan application to be granted. It’s risky on your behalf if you plan to default; however, it can benefit you since secured loans are usually cheaper.
Check Your Outstanding Debt
Getting to know your debt-to-income ratio is crucial as it determines the amount you can borrow. It’s one of the lender’s way to know how much loan you can afford every month as well as how responsible you are with your debts.
Paying a Guarantor Loan with a Credit Card
If you have a loan with rather hefty interest rates and you found out that you qualify for a 0% credit card, you might want to use this opportunity to pay off the debt and possibly enjoy a better payment term. You turn your debt into an interest-free loan by transferring the loan balance to the 0% interest card that will allow you to do balance transfers.
Be Aware of the Limit
As with any credit card, once you get approved, you will know exactly what the maximum limit is to the card. This will help you determine whether it would be enough to cover for the entirety of the loan. If you find that this is enough to cover your loan balance and interest, then it would make sense to do a balance transfer, pay off the loan, and enjoy the 0% interest offered by the credit card.
Zero Interest is Not Forever
Depending on the kind of card you have, the interest rate is not going to last forever. Generally, it can last between 12 and 32 months. This means that you will only have until this period to make at least the minimum payments before the interest kicks in and the regular interest rate will kick in. This can get very expensive though so you just have to make sure that the amount is paid off before then.
Watch Out for Possible Costs
Whilst it is true that this is one great opportunity for you to pay off your debt without any interest, be aware that doing a balance transfer using a credit card is not entirely free. Most of the time, there are fees involve din you using the credit card’s facility. In most case, a charge of 3% out of the total amount that you are transferring will be charged.
Do consider how much you’ll save on interest rates and then compare this with the costs you need to pay for the balance transfer before you proceed. This way, it is easier to assess whether the whole thing is worth the trouble or not.