Basics to help you establish if a guarantor loan is right for you?
If you have bad credit history, getting loan approval can be very difficult. In fact, you will struggle to get a loan or worse off, you might end up getting a loan which with a high interest rate which could easily land you in serious debt issues. Fortunately for you, all is not lost, recently a brand new loan option was introduced. This is the guarantor loan. It is a type of loan in which a second party comes in to act as your guarantor.
What exactly is a guarantor loan?
These are unsecured loans which require you to bring in a second party to act as your loan guarantor. Guarantor loans can be over terms of from one year to as much as five years. Borrowing on the other hand is from anywhere from £1,000 to £7,500. This type of loan is the most ideal for you or any other person with bad credit. The best thing about this type of loan is the fact that; unlike payday loans, and bad credit cards such as the vanquis credit card, the interest rate is way much lower plus you will not be charged for any fees upfront.
How Is a guarantor loan right for me?
Assuming you have poor credit history or if your loan application has been rejected by several other lenders then guarantor loan is for you. This is because; with this type of loan you will have the opportunity to borrow a higher sum than you would be allowed to borrow having applied for other type of loans meant for borrowers with poor credit. In addition to the above, this type of loan will also allow you to gradually rebuild your credit history since it will demonstrate you are a responsible borrower and someone who is able to make re-payments on time.
What is the application requirements/process for a guarantor loan?
Just like for any other type of loan, you must be at least 18 years old. You must also have a UK bank account where the repayments can be collected from. You will also need to show that you can afford the repayments and that you are more than capable of paying back the loan in a timely fashion.
Who qualifies as my guarantor ?
Anyone can act as your guarantor as long as you can prove that they are not financially linked to you e.g. your spouse. Your guarantor can either be a family member, work colleague or better yet close associate or friend. In addition to the above, for your guarantor to be accepted he/she will need to be of at least 21 years of age and has a good credit history. He must also be a UK home owner. Overall, the checks on your guarantor will be identical to normal credit checks from provision of bank statements, proof of ID and bank details etc.
How much interest will I pay for a guarantor loan?
The interest for this type of loan is obviously slightly higher than that of a loan where good credit history is a key factor taken into consideration during the review of your loan application. The APR of guarantor loans is usually around 50% which does not in any way represent the risk being taken by the lender. Just so you know, this is by far one of the lowest APR for borrowers with bad credit history considering other loan types such as payday loans have APR upwards of the 1000%.
Everything taken into consideration, it is important to understand the fact that guarantor loans are not ideal for everyone, however, if your credit history is poor and you find yourself in need of some additional cash then they can be of great solution.