It's no secret...Loans are being made to unemployed people every day of the week. That's right, loans for people who are unemployed, have no regular income and no security for their loan.
Crazy?
Not at all. Lenders will never lend money to any individual if they think there is even the slightest possibility that their loan will not be repaid, after all, lenders and banks are in the business for one thing and one thing only; profit. They will not make any profit whatsoever if their borrowers do not repay their loans, so the question is...Why on earth would a lender or bank lend money to someone who is unemployed?
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The answer is they don't.
Lenders use a little known type of lending called a guarantor loan. In simple terms a guarantor loan allows loans to be made to people who are unemployed, have bad credit, been refused for finance elsewhere or are perhaps still at college or university and don't have a full time job. The principle behind it is sheer genius. The loan application is completed by the borrower who will also be the person repaying the loan. They will complete the application and send it in to the lender or complete it online. The lender will assess the application, realise that (in this case) the borrower is unemployed and has no chance of applying for this loan in the traditional manner so they come up with a plan.
They ask the borrower to provide a guarantor.
A guarantor is someone who will vouch for the borrower and most importantly, they will also be the one that the lender will assess for credit worthiness, not the borrower. So, the loan application is completed by the borrower (someone who can have bad credit, no job, a poor credit history, etc) and the lender completes their credit check on the guarantor. Obviously if a guarantor is going to be involved then they have to have a fairly decent credit history and certainly they will not be able to have any CCJs, defaults or other bad credit. Once the loan application has been assessed by the lender and approved, the loan will be paid into the borrowers bank account and they will be responsible for the monthly repayment.
If however the borrower will not or cannot repay the loan for any reason, then it will be the guarantor who will be liable for the whole outstanding amount because the loan has been underwritten on them, the borrower is simply the beneficiary of the loan, nothing more.
That is why it is easy and feasible for an unemployed person to get a loan and do you know what, it happens every day of the week.
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