A guarantor is an individual who promises to take on the responsibility of paying off a loan in case the borrower is unable to do so. In other words, a guarantor guarantees that the creditor will receive his money no matter what happens. When a person approaches a bank or any other lender for a loan, he may be required to have a guarantor sign the application form. While some loans may require a guarantor to be considered, it does not necessarily mean that the application will approved automatically. Sometimes, the term surety is used in place of guarantor.
One type of loan that may require a guarantor is a student loan. Student loans are taken out by individuals who need extra financial help to continue with their education. Whether or not the student has a job, he may be able to take out a student loan. In many cases, however, they need someone to co-sign or guarantee the loan. If, for example, the student’s parents co-sign the loan, the parents are considered the guarantors.
Even if a lender does not require a guarantor outright, a borrower may opt to include a guarantor in the application. This can help to increase his chances of having the loan approved, although it does not ensure approval. Having a guarantor can help especially if the borrower does not have a good credit score. A borrower is allowed to have more than one guarantor, in which case each guarantor is going to be held responsible for the whole loan amount in case the borrower forfeits the loan for whatever reason.