Guaranteed Loans-When People Are Relying On Each Other
It happens often for people to be turned down by lenders due to various reasons, and for situations like those, the Blue Sky Loans are a solution in hand.
Guaranteed Loans – What Are They?
They are financial services designed to help a certain category of people who, due to different circumstances, couldn’t obtain a loan any other way. Usually, their applications are rejected because they have a poor credit score, although is not always the case.
The loans under discussion always involve a third party, called guarantor. This person stays behind the person who is in fact applying for the credit, and must pay in his\her place, if the former fails in accomplishing the assumed financial obligations. The agreement between the parties is backed by the law, and the one who breaks it will suffer any consequences that may result, however severe.
The Parties Involved in Guaranteed Loans
There are always three parties acting in this case. The first party is the lender, the bank, the person or the institution that will provide the money required. The second party is the borrower, or the one who needs the money, and the third one is the guarantor, who is called this way because he/she stands as a guarantee that the loan will be repaid fully and in time by the borrower. Otherwise, it is his\her obligation to pay it.
The borrower should be over eighteen years of age, and must not be a home owner, or he\she will not be eligible for this kind of loan. The guarantor can be any person close to the prospective debtor, except for the spouse.
Co-workers or friends are also allowed to fill in this position. The rule of 18 or more years of age stands for the guarantor, as well. There is also the requirement that this person should posses a home of his\her own, or at least a shared property.
Other Aspects of the Guaranteed Loans
These loans are not secured, in spite of the requirement that the person who guarantees for the loan be a home owner. The property isn’t in any way affected by the consequences of the debtor failing to pay the loan at the agreed term. The involvement in this loan does not affect the credit scores of the guarantor, unless, of course, he/she fails to pay the debts in question.
Because they are somehow regarded as high risk, the interest rate of these loans is higher than the average interest for regular loans. The repayment period is between one and four years.
The period between the application date and the day when the money is effectively available to the borrower depends on how fast the borrower provides all the necessary documents. Usually, it ranges between three and five days.
By any criteria, this could be considered a pretty expensive way to borrow money. However, considering that these are the last chance they have to get out of trouble, potential borrowers usually decide that the guaranteed loans are worth the price.