A guarantor loan is a specialist bad credit loan which has been created to offer a financial lifeline to borrowers who have been declined credit by mainstream lenders. With this type of loan, the presence of the guarantor is the critical aspect of the loan application as they act as a ‘back-up’ for the loan repayments and therefore reduce the risk posed to the lender. The requirements for the person acting as loan guarantor are fairly flexible and generally anyone who is aged between 25 and 75 and has a good credit history will be viewed as ideal. If everything runs smoothly with the repayments, the guarantor will never be called into action. Even if the borrower does miss a payment and the responsibility moves to the guarantor to make up the arrears, lenders will not generally contact the guarantor immediately after the borrower misses the payment and instead will prompt the borrower to make this payment first. Only if difficulties arise in contacting the borrower or they display an inability to make the payment themselves, will the guarantor be expected to step in.
Available for a Variety of Uses
Because guarantor loans are personal loans, they are suitable for a variety of uses. Many use it for consolidation reasons e.g. to pay off existing credit card debt. Some, however, use the money for personal needs such as a new car, computer or even a holiday, any of these uses are perfectly acceptable. There are a number of bad credit loan options available and deciding on the most suitable option will be dependent on a number of factors:
How Quickly Do You Need The Cash – Guarantor loans online lenders look to provide a same day decision wherever possible. However, this will be dependent on the applicant’s ability to submit the appropriate information.
What Sum is Required? – Despite the speed at which guarantor loans are available, they also offer significant sums of credit as well, ranging from £1000 to £20,000, with the ‘in-between’ option being the tenant guarantor loan which offers between £1000 and £15,000.
What Repayment Period if Required? – This will be somewhat dependent on the size of the loan but generally, guarantor loans are available over a period of 1 to 7 years. Early repayments can be made though with no penalty incurred.
As well as offering a very swift turnaround, guarantor loans also offer another significant benefit – the opportunity to improve the credit rating of the borrower. As anyone who currently has a poor credit history will be able to testify, they find themselves at a significant disadvantage when it comes to trying to obtain a loan. Many financial organisations will not lend to someone with a bad credit history, so once you get a poor credit history, it is very difficult to build it back up again and a guarantor loan will enable you to do this. So if you need a swift influx of funds at a competitive APR which also gives you the opportunity to build up your credit rating, a guarantor loan just might be the answer.
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