- Personal Finance
About Guarantor Loans
What are Guarantor Loans?
Guarantor loans are a type of loan that are suitable for people who have poor credit history. A guarantor loan requires that the loan is guaranteed by another person, and that person is known as the guarantor. If your credit status is bad, a guarantor loan can improve your credit rating providing you make prompt repayments. Usually a guarantor loan is between £1,000 and £5,000 which should be repaid within one to three years. An advantage of guarantor loans is that in the event you are able to settle the debt early you will not have to pay a penalty, but you will save on interest.
A guarantor is an individual who agrees to make repayments on the loan if the situation arises that the borrower cannot pay. A guarantor must have a steady income and be a homeowner, and they will also need to have a good credit history. The guarantor cannot be in a financial or personal relationship with the loan applicant, i.e. a husband cannot be the guarantor for his wife.
The guarantor will usually be required to provide proof of identity as well as proof of income. Once the lender accepts that they are able to make repayments, there is a very good chance that the loan will be approved.
You might think that as your guarantor has provided proof of income, that as applicant you will not need to do this yourself. This is a common myth, as the lending bank will also want to see your proof of income and identity: If the bank does not think that you will be able to repay the loan, you will not be granted the money regardless of the status of your guarantor.
All reputable guarantor loan lenders should have a website that provides an application form that you can fill in online: This makes the process much faster and convenient compared to filling out paperwork. Be very careful when filling out an on-line guarantor loan application form that you do not give wrong information. This would delay the process and it may give you an incorrect result: For example you might be told that you have been approved for the loan when in fact you would not be. Before applying online you should also make sure that your guarantor would be able to pay the loan in the event that you miss repayments, as if he could not, you are simply wasting everyone's time.
Guarantor loans are a great alternative to payday loans for which you will end up paying enormous amounts of interest, so the next time you need money quickly you should consider a guarantor loan. The economic situation has led to many people having money difficulties and bad credit. For these people a guarantor loan is a beneficial way to raise money to pay an unforeseen emergency bill, replace an old car, or buy an item that will help increase income; such as power tools or computer equipment.