Guarantor Loans: An Effective Borrowing Solution for People with Bad Credit

Guarantor Loans: An Effective Borrowing Solution for People with Bad Credit

The fact is that there are limited borrowing options for those with bad credit, but a guarantor loan can provide an excellent alternative. These loans have risen in popularity in the UK over the last ten years or so because of all the benefits they offer. If you have found it difficult to get a traditional personal loan because of your credit, this is one option you should learn more about. A guarantor loan could be the solution you need for getting money without all the red tape and frustration.

What is a Guarantor Loan?

The first thing you will need to learn is what exactly a guarantor loan is. This type of loan is designed to help those with bad credit. You will need another person to act as the guarantor, which is someone who agrees to take on payments if the borrower can no longer do so. There are certain standards for both the borrower and guarantor that need to be met before approval can be given. The requirements for the guarantor are going to be far stricter than for the borrower though.

Who can be a Guarantor?

There will be certain requirements that need to be met for a person to act as a guarantor. This person must have at least a fairly good credit rating as well as adequate income. The lender needs to know that the guarantor will actually be able to pay back the loan if you can’t. It can be somewhat challenging to find the right person to act as the guarantor for this type of loan because of the stringent requirements.

Borrowing Amounts

One of the great things about guarantor loans is that you can borrow a fairly high amount of money. The maximum amount that you are allowed to borrow will depend on a few things, including your income as well as the guarantor’s income and credit rating. Guarantor loans typically have a higher borrowing amount than most others.

What Happens if You Default on the Loan?

If you can no longer make the minimum monthly payments on the loan you take out, the lender is going to turn to the guarantor to pay off the remaining balance on your account. If the guarantor is unable to pay, your current and the guarantor’s will both be negatively impacted as a result. It is important that you only take out one of these loans if you are absolutely sure that you’ll be able to pay it back by the due date.

Guarantor Loan Lenders

There are numerous private lenders that give out guarantor loans, making it essential for you to do some research before making a decision on one of them. The lender you choose will decide what your interest rate is going to be like among other things, so you don’t want to choose just anyone. The more research you do into your guarantor loan lender options, the easier it will be to get a reasonable deal. Make sure that the lender you choose is 100% legitimate so that you don’t get up getting scammed or ripped off at all.

Main Benefits of getting a Guarantor Loan

You will quickly discover that there are a lot of benefits associated with guarantor loans, including:

  • Longer terms: Guarantor loans typically have longer terms than other types of loans, which means that you will have longer to pay off the money you owe. The length of the term will be decided by how much you borrow.
  • Low borrowing standards: The standards for getting a loan are fairly low for the primary borrower. You don’t have to have good credit to get approved for one of these loans, but the person who acts as the guarantor does.
  • Flexibility: These loans are also very flexible, so you can spend the money you get on whatever you want. It is incredibly rare for these lenders to ask applicants what they plan on spending the money on. Most personal loans can only be used for specific things, so you will want to keep this in mind as well.
  • Solution for emergency situation: If you are in an emergency financial situation and need money fast for some crucial expense, a guarantor loan can be quite useful. If your car needs to be repaired or you have home repairs that need to be done, this type of loan can help.
  • Increase your credit score: If you manage to pay off your guarantor loan in full and on time, your credit score will improve dramatically. A solid credit score is essential for many reasons these days, especially for those who want to buy a house at some point.

Applying for a Guarantor Loan

You can apply for a guarantor loan online, and it’s important that you are prepared for all of the information you will need to submit. While these loans do not typically take very long to complete, you will be required to submit personal and financial details. The lender will want proof of your income to make sure that you make enough to pay off the loan on time. The person who is acting as your guarantor will also need to submit this same kind of information.

Is a Guarantor Loan Right for You?

Guarantor loans have helped countless people in the UK, but they aren’t right for everyone. You should carefully evaluate your own financial situation before deciding whether or not to apply for one of these loans. You shouldn’t take out a loan unless you absolutely need one. It’s also a good idea to compare loans online and get quotes so that you can get the best deal on yours. You will have to find someone to act as your guarantor as well. Don’t choose just anyone to be your guarantor, as you’ll need to trust that they will take over payments if you are unable to at any point in time.

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