Guarantor loans have gained quite a bit of popularity with the public over the years, and they are essentially unsecured loans that require borrowers to have another person with good credit to act as the guarantor. These loans are typically for those who do not have very good credit but know someone with good credit who is willing to assume responsibility for paying off the loan if they are not able to for whatever reason.
Who are Guarantor Loans for?
Guarantor loans are best suited for those with low credit scores. If you have poor credit and have found getting a traditional unsecured loan to be difficult because of poor credit, a guarantor loan could be a good alternative. It is important to keep in mind that these loans typically come with a higher interest rate than secured loans, as they do not require any collateral on the part of the borrower.
One of the best things about guarantor loans is that they offer people the ability to demonstrate to credit agencies that they have a track record of borrowing and paying back money in their own name. If you are in the process of trying to rebuild your credit, it is highly recommended that you take the time to look into this particular loan product.
Is approval for Guarantor Loans a sure thing?
No, there is never any guarantee that you will be approved for one of these loans. Many people’s guarantor loan applications are rejected for a number of reasons, but it’s typically because they are seen as too much of a liability by the lender.
In order to qualify for a guarantor loan, you must be over the age of 18, have an active UK bank account, and willing/suitable guarantor. It is the potential guarantor that will have their credit history scrutinized, but the primary borrower still needs to demonstrate their ability to pay back the loan in a timely manner.
Who can act as a Guarantor?
Anyone can act as a guarantor, provided they have a good credit score and adequate income to be able to pay back the loan if the primary borrower cannot for whatever reason. The relationship between the actual borrower and the guarantor doesn’t really matter at all. The guarantor must also be between the ages of 18 and 74 and be a homeowner, even though the loan is not typically secured directly against the property. The lender will most likely ask the guarantor for proof of ID as well as employment and bank statements.
Applying for a Guarantor Loan
You will typically be able to apply for a guarantor loan online as opposed to going down to a bank, credit union or private lender’s office. It is highly recommended that you take the time to check guarantor loan comparison tables if you are interested in applying for one of these loans. Once the lender has made their decision (this process can take up to a few days), the funds will be transferred directly into your bank account.
There are broker services that you can take advantage of when trying to find the very best deal on this type of loan, and you might want to consider paying for them. These services can really help you get the loan you need with minimal fees, so you don’t end up paying more than you have to.
Things to consider
You will need to consider a number of things prior to applying for a guarantor loan, such as whether or not you will be able to pay back the full amount that you borrow on time. If you fail to pay back the loan, the person that is named as the guarantor must do it. Failing to pay back your loan will reflect poorly on your credit score, so you will need to keep that in mind as well.
Make sure that you take the time to read over the fine print of the contract that you sign with your lender so you don’t miss anything. You do not want to make the mistake of not being thorough when reading the contract that is put in front of you.