Types Of Guarantees

Are you in need of a guarantor loan? There are different types of guarantees that can be used along with a home loan. Amidst all these options, it is hard to determine which one best suits your needs.

Choosing a guarantee

Some things need to be looked into when choosing a guarantee for your needs. You may need to consider carefully which assets are available to support the loan that may be cash, property, or someone’s income. Your parents may offer their assets as security for the loan or they may give you deposit for the loan. The type of guarantee you choose depends on your guarantor and your situation. It is therefore advisable the options with your guarantor when making a decision.

Main types of guarantees

The common type of guarantors includes the following:
Security Guarantee: this is where a property is offered as security for the loan. This is commonly used by parents and guardians who are guaranteeing the loan for their children.

Serviceability guarantee: this is where a guarantor pledges to use their income in advancement for the loan. This is taken by parents whose kids lack money to service the loan.

Security and Serviceability guarantee: this is both a combination of serviceability and security guarantee. In this type, a guarantor offers income and property to the borrower towards the loan advancement.

Family guarantee: this can be either security or serviceability that is only provided by family members.
Parental Guarantee: under this type, the parent can guarantee the loan by either offering property as security or by serviceability guarantee.

Limited Guarantee: here, the guarantor is limited to a part of the home loan.

Debt consolidated guarantee: this is where the home loan is guaranteeing the payments of other different loans.

Term deposit guarantee/ cash guarantee: this is where the loan is secured by cash not property.

Which banks can help?

A lot of banks have guarantor loan products available and it is you to choose which best suits you. Some lenders only focus on certain guarantee types.

What should I ask my guarantor?

Consider the following questions:
Do they own properties?
Do they have a deposit?
Do they have an income?
What is your relationship to the guarantor?
Is their property already mortgaged?