Before you apply for a loan with one of the lenders above ensure that you have a suitable guarantor in place who has agreed to act as the guarantor and understands the responsibilities. This will help speed up your application process and make the process easier when you come to apply.
Reasons to compare guarantor loans
Compare guarantor loans for the lowest rates
Guarantor loans are the latest model of lending to take the UK finance industry by storm. A few years ago, this type of lending was almost unheard of, but it is now so popular that there are many lenders willing to make this kind of arrangement with borrowers.
As with other types of loan, there are many different types of guarantor loans, so it makes sense to compare and contrast the different companies offering these loans, and make sure that you know which company is the best, and which is the most likely to benefit your needs, and your ability to pay. If you can find a broker to help you compare guarantor loans directly from lenders, then you may also be able to get the best loan for interest and repayment charges, as well as finding a lender you are comfortable with.
Reasons to choose a guarantor loan
If your options are very limited due to your circumstances, then the guarantor loan could be one of your best prospects. Some of the advantages include:
- Being able to borrow up to £10,000 and flexibility to pay the loan within five years
- It does not matter if you have a bad credit history or not history at all
- Your guarantor can be a homeowner or a tenant, a close relative, a colleague or a friend.
- The loan is considered to be significantly cheaper than choosing payday or fast repayment loans, and with fixed repayments, you will be able to start clearing poor credit histories, or improving your credit rating.
How to get a guarantor loan?
In order to be able to get a guarantor loan, you and your guarantor need to fit the lender’s affordability criteria. So the first step will be to talk to the lender and ask what the requirements are for this kind of loan. Requirements may vary from lender to lender, so it is a good idea to do some research first. Most of the common requirements will be:
- Be at least 18 years of age and a UK resident
- Have a UK bank account
- Must not be bankrupt.
- Provide proof of identity and proof of income
- Guarantor must have a good credit history and prove that can afford the payment of the loan in case the borrower defaults
- Required to be a homeowner, but there are also a selection of non homeowner guarantor lenders who can help if you guarantor is a tenant.
What to look for in guarantor loans
What to look for when comparing guarantor loans
The first thing that you should be looking for is flexibility. This is the ability to offer you different types of loans within the guarantor structure. For example, if you only want a small amount, for a short period, then you may want to look for a guarantor who is able to offer small, short-term loans over a period of months, rather than years. However, if you want a larger loan up to £10,000, then you need to compare lenders who are willing to go a little bit higher, and who are also willing to allow you to repay the debt over a longer period of time.
You should also look for lenders who are able to handle your particular circumstances. Not all borrowers using guarantor loans are people with bad credit, or a low credit score. Some are self-employed people who want to borrow money for business purposes, but are not able to find a business loan suitable for their needs. More and more individuals running their own business are choosing to have a guarantor loan rather than looking for costly and expensive business loans. Comparing different lenders can help you to find a company that would be willing to lend money for your particular circumstances, and this could help you to get special rates, or particular deals over repayment schedules. Those with bad credit might want to look at lenders who guarantee that they will report positive repayments to credit check companies, so that your credit score improves.
Are guarantor loans too expensive?
Consider the cost when taking out a guarantor loan
Guarantor loans are loans aimed for people with poor credit history or people who can’t meet all the major lenders’ criteria for other types of loans. Usually self-employed people fall in the latter category and when they need some cash to inject to the business they find out that their options are very limited. This makes the options available to them very expensive. However, the guarantor loans are the ones which offer lower interest rates compared to other loans such as payday loans, for example, which can charge an APR upwards of 1000%.
The interest varies from lender to lender but on average, it is around 50% APR. It is important to note that although this is still a very high percentage compared to the APR of loans where good credit history is a requirement, it represents the level of risk the lender is undertaking when offering the loan and it is still very low compared to payday loans.
Loan calculator – how much will it cost?
Calculate how much your guarantor loan will cost over the period of the loan. Find out how much interest you’ll pay and what the monthly repayments will be.
This calculator will give you an idea of costs. The exact amount and APR payable will be provided from the lender subject to credit and affordability checks.
Your monthly payment will be:
Interest on this loan will be:
Annual Percentage Rate (APR):
Total repaid will be:
Before you apply for a guarantor loan with one of the lenders above ensure you fully understand the cost of loan and that you can afford to meet the monthly loan repayments. Discuss this with your guarantor so that you are both in agreement.
Getting the most from guarantor loans
One of the most important reasons why borrowers should take the time and effort to compare guarantor loans is that choosing your lender carefully can help you to get the most out of the loan, and can also reassure your guarantor that you are doing your best to protect them and to ensure that you can repay what is owed.
Comparing guarantor loans can also benefit you, because it allows you to develop more insight into what you are borrowing, the total amount you will be repaying at the end of the loan term and the affordability criteria the lenders apply, which will allow you to go into the loan with a clearer idea of how the loan will work and the cost of borrowing.