Guarantor loans are a perfect option for borrowers with a poor to bad credit history and who require a loan from between £500 – £10,000 to be repaid over 1 – 5 years. Taking out a this type of loan direct with the lender provides you with a much greater chance of being accepted for a loan when compared to conventional personal loan without a guarantor.
Reasons to compare guarantor loans everyone should know
Guarantor loans are more popular than ever
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 the lenders themselves, 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 borrowing from.
What to look for?
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.
Getting the most from these type of loans
Guarantor loans can be arranged quickly
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.
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.
Is it possible to find short term guarantor loans?
Guarantor loans repaid over the short term
Looking for a short term loan but don’t want to turn to payday loans or other similar debts? Then you may need to find someone who is able to help you get the loan that you need in the form of a guarantor borrowing arrangement. These loans tend to be in the long term, but it is possible to find lenders who are willing to allow you to borrow small amounts of money, and to pay it back within a shorter time than usual. If you only need a small amount, for example less than £500, then you may have a chance to take out a short-term guarantor loan with a friend or family member.
When is it possible to have short term guarantor loans?
The standard guarantor loan will be up to around £1000, although most of the providers offering this service can offer up to £10,000. These loans are long-term agreements, and the repayment time will vary, from 12 to 60 months.
Short term guarantor loans, on the other hand, tend to be lower than the usual amount, often between £50 and £500. These are very small amounts that could help to pay an overdraft, make a home repair or car repair, buy something that is urgent at home or even help you to build a better credit score. With these small amounts, banks and other lenders are more likely to be flexible about repayments, so while you will not have to pay back the sum in less than a month, you will have the option of paying the money back in perhaps three or four months. The larger the amount you borrow, the more months you will have to pay.
What are the restrictions on short-term loans?
Fast short term loan approval
As with all types of loans, there are some restrictions which affect how you borrow the money, who is eligible, and who is responsible for the debt. If you want to take out a debt with a second person, then you will need their consent, and they must also be available to fill in forms and to commit their resources to repaying the debt if you cannot. The lenders insist that you have this person available throughout the debt, so if your family member or your friend who is willing to act as your guarantor wants to move to Australia in six months’ time, they would not be a suitable candidate for the loan.
Some lenders charge early repayment penalties, so you need to be aware of all the terms and conditions of your lender, as it can be quite a large chunk of the original debt. In other cases, lenders calculate their interest daily, so it is very likely that, if you decide to pay your debt early, they won’t charge you a penalty and will allow you to pay interest for only the time you’ve had the loan.
Are guarantor loans for people with bad credit the right solution?
Guarantor loans for people with little or no credit history
Do you need to take out a loan, but are being prevented by your bad credit history? If you have a past which involves being chased for payments, or even receiving a county court judgement against your name, then you are unlikely to find many lenders who would be willing to risk lending you any amount of money. You may have struggled to get loans in the past, which will make your credit history worse, but even if you were offered a loan, it may have been at an extremely high rate of interest, to the point where you didn’t think that you could afford the repayments. Guarantor loans were created to solve this problem.
What happens in a guarantor loan?
If you have bad credit, and want a loan, then you may benefit from finding a friend or family member to take out the loan alongside you. Loans often range from between £500 and £10,000. The interest is lower than other kind of loans for people with bad or poor credit history, and there are no arrangement fees or charges if you borrow the money from a direct lender. When you apply for the loan, both you and your guarantor will have to establish that you are both in a position to pay back the money owed on the account. If you can’t prove this, then you will not get the loan, no matter how much your guarantor is worth.
Are these types of loans the solution for everyone with bad credit?
ideal loans if you have a bad or adverse credit history
Guarantor loans have been designed almost specifically with the bad credit borrower in mind. By using the second person as a guarantor, borrowers can get a better interest rate and ask for a higher loan amount than banks would normally allow. These loans can also be the ideal way to help borrowers rebuild their credit rating.
Although this type of loans are designed for people with some patches on their credit record or poor credit history or credit score, people who have an Individual Voluntary Arrangement (IVA) or have declared themselves bankrupt, won’t be eligible for this kind of loans, even if they have a guarantor who meets all the requirements of the lender.
What you need to know about direct lenders
Apply direct with the lender
If you have been refused a bank loan due to poor credit, then you may feel as though you will never be able to get the money you need. There are several different options for those with bad credit, including the well-known payday loans, and other forms of short-term loans which often have high-interest rates. Even when your credit rating is on the pavement, you should be able to find a lender to provide you with a loan if you can find a person to stand as your guarantor. These kinds of loans are now open to everyone, from people on benefits to those who are struggling to run a small business.
To use or not to use a loan broker?
Want to avoid loan brokers then go direct
The best way to borrow money with someone to guarantee you is directly from the lender. You can try to do your research by yourself, making enquiries over the phone or internet, so you can get all the facts and information you need. If you can’t find a lender yourself, then you may want to consult a loan broker, who can help you to find a lender that can offer you the loan directly. The broker will work hard to get you the best loan for your situation, including searching for good interest rates, fees and payback costs. However, you have to bear in mind that brokers charge a fee or commission for their services and sometimes those costs are added to the full cost of the loan so it is included as part of your monthly instalments. The broker will present you with a price that will reflect this, and you will also be able to find a full rundown of charges in your credit agreement. You have to decide whether the convenience of having someone doing the research for you is worth the extra money you will pay each month.
There are other cases in which third parties offer to find you a guarantor loan and charge an upfront fee in order to do their job. If you have been trying to get a loan through this method and they have not been able to find you a loan, you could be entitled to get your money back, or at least some of it. It is important to always read the small print before you commit to anything or sign any documents. Another important thing to do is to check if the broker or lender has the relevant credentials that will give you the peace of mind, for example, you should be able to find their FCA (Financial Conduct Authority) reference number on their website.
Why guarantor loans for unemployed borrowers are so popular
Unemployed and need a loan?
If you need a loan, but are currently unemployed or on some form of benefits, you will often struggle to get the money you need. You could have a perfect credit rating, but you would probably still be refused by banks and building societies because you have no salary. If you have a poor credit rating, this could make the situation even worse, and you may think that you will never be able to get a loan. With the guarantor loan for unemployed people, you can get the money you need without having a job, or while you are on disability income and benefits.
How the guarantor loan for unemployed people works
There are millions of people seeking work in the UK, usually the young, and if you are one of those receiving benefits, then you know how hard it is to make ends meet. If you don’t own your own home, as well as needing benefits, then you might also not be able to raise the money through borrowing against your home. Sometimes, a loan could actually help you to branch out on your own by setting up a business, get you a car so that you can drive to a new job, or even just help you to fund repairs that could help to reduce your bills in the long term. In order to do any of these things, you need to be able to borrow money.
The guarantor loan is one of only a limited number of loans available to unemployed people. Unlike most types of loan, these are available with no credit check, or for those whose credit standing is low, or those who have a poor or no credit history. Once the lender is satisfied that you and your guarantor meet their lending criteria, you could receive the money you need. Please note that it is important you and your guarantor have a relation of trust, as on this kind of loans the guarantor agrees to pay the debt in case you default for any reason. The guarantor must fully understand this and agree to pay the loan in the event you were unable to.
Who is using guarantor loans?
Guarantor loans for people with little or no credit history
Guarantor loans are popular because they allow people who would not ordinarily be allowed to get a loan to take the money by like in the “old days” having a third party vouch for them, and promise that the loan will be repaid, one way or another. People using this loan tend to be those in a financial situation where they can’t get any other kind of loans or have a adverse credit history. They may be those with bad credit or with a poor credit history. They may be unemployed or on benefits, or they may also be seeking to bolster and build up their credit rating by taking out a loan and then paying it back in time. All of these people welcome the chance to take out a guarantor loan.
Guarantor loan vs payday loan – What is the difference?
Although both types of loans have been created for the person with bad credit history, there are some differences that need to be considered. The first and most obvious is that for a guarantor loan the borrower will need someone to be his or her guarantor. This can sometimes prove to be difficult for some people and even if a guarantor is found, this person must meet the lender’s criteria as well. In the case of payday loans, applicants don’t need to provide a guarantor, but will need to meet other requirements.
Another important difference to take into account is the interest rates. Some payday lenders apply an APR of up to 5,800%, whereas the average APR of guarantor loans is around 50%.