Bad Credit Home Loans With a Guarantor

By Angela Monroe - August 3, 2018

Bad credit home loans can be tricky to come by. However, there are several options you can explore – one of which is using a guarantor.

Home loans with a guarantor can increase your chances of getting a bad credit home loan and make your dream of owning a property become a reality. Speak to us today to find out how we can help you to get a bad credit home loan with a guarantor.

What are home loans with a guarantor?

Guarantor loans are unsecured loans, which require you, as the borrower, to have a second person to ‘guarantee’ the loan.

This type of loan is generally aimed at people with bad credit who are hoping to get a home loan but struggling with traditional methods.

A guarantor takes on the role of being the first name on the mortgage (as a co-signatory) or acting as a backup if you, as the borrower, starts to fall behind on payments.

Pros and cons of home loans with a guarantor

This is a slightly risky business to enter into – especially for the guarantor who will ultimately pay the price if you are unable to pay back your home loan. However, it can also be a great way to get on the right track and be successfully approved for bad credit home loans.

Pros:

  • You will be able to borrow a higher amount than you would without a guarantor.
  • Your loan will be considered lower risk, so you may have access to better interest rates.
  • If your loan is paid back successfully, you could improve your bad credit score for future borrowing.
  • This type of loan has existed for many years and is a tried and tested method.

Cons:

  • If you default on payments, your guarantor will be seriously affected – their credit rating could be harmed and your relationship with them will inevitably be strained.
  • Borrowing larger amounts means that you’ll be under more financial strain to pay them back. If you are struggling financially, be wary of the higher figures you may be able to borrow with a guarantor loan.

Choosing your guarantor

Most people choose a close friend or relative to become a guarantor for their home loan with bad credit. Usually, there will be reluctance from a potential guarantor as the request for them to act as a back up on a home loan is relatively risky.

You will need to do everything you can to assure your guarantor that you will be able to pay back your loan – it’s worth getting everything in order so that they can see exactly how you intend to pay your home loan. It’s also worth being as honest as you can be with them so they have a clear idea of the situation.

Some of the things you’ll want to consider when choosing your guarantor include:

  • A good credit history
  • A stable income
  • Permanent residency
  • Ideally a home owner
  • Sufficient financial funds to cover your home loan if required
  • Between 25 – 65 years old

It’s always good to get a professional agreement drawn up between yourself and your guarantor. Always make sure everything discussed is put in writing.

Getting a bad credit home loan with a guarantor

Don’t despair if you have bad credit. Using a guarantor to get a home loan can be a great option for achieving your goals. Contact us for advice and guidance with getting a bad credit home loan.

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.

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