Guarantor Loans, a way of securing lending with the help of another, have risen in popularity over the last few years - you may have heard of someone acting as a guarantor for a loan or a rental property.
Many years ago they used to to be the only way to borrow - a bank would ask for a guarantor to keep up payments if you could not. Since banking has become reliant upon computer generated credit scores, using a guarantor became less popular - but they have now become part of the mainstream lending market again, as an easy and fair way to borrow.
What is a guarantor?
A guarantor is a homeowner who assures the loan provider that you can make your payments. They are usually a close friend or family member who has a better credit history than you and crucially, they can be a homeowner. When you apply for a loan it’s not just your credit history which is considered – your guarantor’s credit history will ‘boost’ yours up.
How does a guarantor loan work?
You can borrow up to £5,000, for home improvements or a car for example, with a guarantor loan and pay this back over a period of up to 5 years. The lowest amount you can borrow is usually £1,000 and the lowest repayment period is 12 months - this means that you will pay a loan instalment once a month for 1 year.
When you apply for a guarantor loan, your payment schedule will be detailed and you'll be able to see how much you need to pay monthly towards your loan.
You should ensure that you can easily make this repayment every month to reduce the risk of your guarantor having to step in. Of course, most people with guarantor loans make every payment in full and on time so their guarantor never needs to do anything.
Who are guarantor loans best for?
Guarantor Loans are ideal for those with a poorer credit history, who may not qualify for a high street bank loan. You may have been affected during the recession and credit crunch and you may struggle to get credit as a result. A guarantor loan is the ideal way to get the credit you need at a reasonable rate, whilst still having the opportunity to improve your credit history at the same time. In fact, every time you make a loan payment in full and on time, this will count towards credit history improvements. For this reason, guarantor loans are perfect for those who:
How do I apply and receive a guarantor loan?
Both you and your guarantor will have to enter your details online, using our application process, and we’ll then be in touch to make sure you’re both happy with the arrangement and that you meet the lending criteria. Once your loan has been signed off, your guarantor will receive the money straight into their bank account. Your money is then just a quick transfer away. You and your guarantor are free to work out an arrangement to suit you. Apply here.
Apply for a guarantor loan.
To find out more about guarantor loans contact us
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