There are lots of different variations of bad credit loan currently available. If you believe that you have difficulty getting a loan from a bank or building society due to the current state of your credit rating, this is great news. Whilst some of these loans can ultimately prove to be very expensive, there are some exceptions to the rules, with guarantor loans being high up the list. Online guarantor loans offer the perfect way of borrowing for anyone who does not have a perfect credit history. Because they are essentially unsecured personal loans, they offer the ideal alternative to other bad credit loans including payday loans.
What Makes Guarantor Loans Different?
It is the presence of the guarantor that separates the guarantor loan from all other bad credit loans. The majority of other poor credit loans use either some form of security, such as the logbook loan, or a very high APR, such as the payday loan, to reduce the risk to the lender. Where the guarantor loan differs is that these use a person (typically a close friend or family member) to co-sign the agreement along with the borrower. By doing this the guarantor undertakes an agreement to take over the repayments if the borrower cannot make them.
How Does This Help Though?
Because of how much the risk to the lender decreases because of the presence of the guarantor, the lenders are prepared to offer a loan to people who would before have been rendered ineligible. Would you answer yes to any of the following questions?
Have you ever missed any repayments in the past?
Have you recently moved home?
Have you recently started a new job or are self-employed?
Are you new to the UK?
Do you have a limited credit history?
A single affirmative answer above would previously have been enough to see your loan application turned down but with a guarantor to back your application, there is every chance that you may now be eligible for a loan of up to £10,000 which can be repaid over a period of up to 5 years. All over which can be obtained without risking your future.
Benefits of Being a Guarantor?
Not only is a guarantor loan a great way of helping out the borrower, but it also offers the chance for family members and friends to help the borrower get back on a firm financial footing without actually lending them the money themselves. Although as a guarantor you will be responsible for any missed repayments, assuming the borrower keeps up, you will not have to do anything at all after the agreement has been signed.
What Makes Them So Flexible?
Because guarantor loans are unsecured personal loans, the borrower can use them for whatever purpose they wish, within reason of course! Very popular for use as a debt consolidation method, they are equally popular in helping the borrower to buy a new car, head off on that dream holiday and a variety of other uses. An often overlooked benefit of this type of loan is that when used correctly, i.e. repaid on time and in full, it will help the borrower to take significant steps towards repairing their credit rating. This will in turn help to open up even cheaper loans in the future.
Amanda Gillam is Solution Loans's General Manager and has been since 2009. She is also a prolific writer on personal finance issues, and has been quoted numerous times in articles published on 3rd party websites and in press releases. Her...Read more about Amanda Gillam