Our Loans – About our Guarantor Loans
Obtaining a loan when you have a small deposit or a bad credit score may be really difficult but a guarantor loan can be useful in these circumstances. A guarantor loan is an unsecured loan requiring one to have a guarantor. The guarantor is the person who is willing to make repayments on your behalf should you default on your repayments. Today, guarantor loans are becoming more and more common and offer an alternative means of borrowing for those people with a credit history that is poor.
How guarantor loans work
When applying for a guarantor loan, you are required to supply the details of a person who will repay your loan if you default in making the repayments. This minimizes the lender’s risk, which means that they are in a position to offer lower rates of interest that you could find anywhere else. Your guarantor is only expected to assist as a last resort and is never involved in making repayments.
Who can become a guarantor?
A guarantor can be anybody but in most cases, they will be a family member or a close friend who you can entrust to keep up your loan repayments. If they are a relative, they should not be linked to you in terms of financial matters, such as a spouse.
Generally, guarantors have to be at least 21 years of age and must also have a good credit score that will be checked to confirm a positive rating. They will be expected to provide proof of their residential address, identification, bank statements and other details.
They are also expected to be UK homeowners and in case the lender needs security, they are supposed to have adequate equity matching your loan’s value.
Borrowing through Bad Credit-Guarantor loans
Guarantor loans target those people that have bad credit scores and who the mainstream lenders have turned down. To have somebody who can support you may help you borrow at rates that are more sustainable making it easier to repay your debt. Even though they give these loans at lower interest rates than payday loans, these loans are still costly.
Credit Score Rebuilding
When all the guarantor repayments are met, your credit score can be rebuilt. This makes it easier for you to be considered for future mainstream credit cards and unsecured loans having low interest rates. To have your credit score improved, one may also use credit builder cards. Remember that even though borrowing money indeed helps in rebuilding poor credit scores, it can only help if borrowings are made in a sustainable manner and all your repayments are met. If you are not sure of your credit score, it would be wise to check your credit report prior to applying for any type of credit.