Taking out a loan is a big decision to make at any point in time. This is especially true if you already have existing debts or are currently receiving only a low income. It is therefore very important that you choose a loan wisely. However, choosing a loan can also be a minefield if you suffer from a poor credit record. If you have recently been refused credit or have a low credit score or bad credit history, a guarantor loan could make it much easier for you to be accepted for a loan at a much more affordable rate than many of the other bad credit alternatives which are currently available. Generally speaking, lending institutions adopt the attitude that if you can get someone to stand by your side and agree to repay the loan on your behalf should you be unable to do so, this will reduce the risk sufficiently for them to look past any previous credit problems that you may have had.
How Exactly Do Guarantor Loans Work?
Lender responsibilities now extend from adhering to financial regulations to providing quality loan products and services with exceptional customer service to credit-worthy borrowers. The creation of guarantor loans offers lenders the chance to look beyond the poor credit rating of the borrower whilst still not exposing themselves to increased risk. When a loan agreement involves a third party who guarantees the loan, it is referred to as a guarantor loan. Usually, guarantor loans involve written agreements that are signed by not only the borrower but also the guarantor. Key points of a guarantor loans UK
Eligibility for a guarantor loan is based upon the creditworthiness of the guarantor NOT the borrower.
The guarantor must be aged 18 or over.
Varying amounts of up to £20,000 are available.
Loan duration may be as long as 7 years.
Because they are personal loans, they are available for a variety of uses.
Ideally suited for borrowers with a poor credit rating.
Swift payouts available.
Credit rating of the borrower will improve if payments made in full and on time.
A guarantor loan is an unsecured loan and because of this, there are no stipulations requiring the borrower to be a homeowner. Ideally suited to borrowers without significant assets, a guarantor loan offers an opportunity for those who would normally find it difficult to borrow. As students, tenants and people without a regular income find that obtaining new lines of credit is becoming increasingly difficult, guarantor loans are becoming more and more popular for those seeking either short term or long term credit. So who can you ask to be a guarantor? Responsible lending by loan companies typically requires a guarantor to be a homeowner (if you want to borrow more than £7500), have a steady income, a suitable amount of disposable income and an excellent credit history. Generally, people most likely to fall into this category are either close friends or family members (not spouses or partners) who are willing and able to take over repayments if necessary. As long as they are aware of their legal obligations to repay the loan should you default, there will be no need for them to do anything else once they have agreed to guarantee the loan. And once you get your cash, you can always buy them a drink to thank them!
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