Guarantor loans are a recent addition to the unsecured loan market, and are specifically for borrowers who, for whatever reason, find they cannot secure a loan on their own.
Here we look at the product in more detail and consider when you might need to use one.
What is a guarantor loan?
The loan enables someone who would not normally find themselves eligible to borrow money to take a loan. They choose another person, perhaps a friend or family member, to act as their guarantor and co-sign the loan agreement.
Should the applicant default on any repayments, the guarantor would then be liable for these payments.
How much can I borrow?
You can borrow between £1,000- £5,000 with guarantor loans and there are no upfront costs. When applying for the loan, your income will be assessed to check that you are able to meet the repayments within the specified time frame and your guarantor will co-sign to give the lender extra security.
Who could benefit from a guarantor loan?
If you find yourself struggling to get approval for loans, then a guarantor loan may be the ideal solution for you.
There are various reasons why you may have difficulties in getting a loan, such as:
- Lack of credit rating
- Poor credit rating
- Previous issues with borrowing money
- The value of the loan
If you are affected by the above issues, guarantor loans provides an alternative option as, should you default on payments, your guarantor will become responsible for the debt.
When might I need a guarantor loan?
Guarantor loans are available to people in ranging circumstances, and with so many people in the UK ineligible for borrowing in the usual way, they are increasingly being seen as a viable alternative.
A growing number of lenders are offering guarantor loans as they give you the opportunity to rebuild and improve your credit rating by demonstrating that you can meet the loan repayments and borrow responsibly, making it easier to get a loan in the future.
Of course, taking out a loan is not a decision to be made lightly, and when applying for a guarantor loan, like any other loan application, you will need to be confident that you can meet the repayments. You must also discuss the situation with your guarantor and ensure they are happy to fulfil this role on your application.