My Financial Broker is a credit broker and not a lender. Warning: Late repayments can cause you serious money problems. For help, go to https://www.moneyhelper.org.uk/
Sometimes a short term loan is not going to match your needs. It may be the case that you need more than £1000. Or it may be that you can’t afford to pay off your short term loan in one go. If you’ve been refused a payday loan it may be because you’re unable repay the loan in the specified time. This is usually one month, or up to 35 days. Instalment loans on the other hand, may be more affordable, as you can pay over a few months and spread the cost.
When this happens we often feel that there are no options available to us, but there are options available. A guarantor loan is one of those options. A guarantor loan works in a similar way to other forms of credit except for one crucial aspect. You’ll need a friend or family member who can step in, if for any reason you struggle to make payment.
As banks tightened up on lending, guarantor loans have evolved to fill a gap in the lending market. Especially beneficial for those with a bad credit score, guarantor lending enables those with a poor credit history to take out a short term loan. The security offered by having a third party guarantee a loan takes the risk out of lending, should the borrower default on their re-payments. This means the borrower can benefit from more favourable terms, such as a lower APR or longer re-payment period.
A guarantor loan is an unsecured loan, and so the borrower need not be a homeowner. Most suited to those without assets, a guarantor loan offers an opportunity for those who’d normally find it difficult to borrow. Students, tenants, and people without a regular income have been finding it ever hard to access loans. So the guarantor loan has become an increasingly popular option for those needing short term credit.
So who can you ask to be a guarantor? Responsible lending by loan companies typically requires a guarantor to have a regular income. They’ll also need a disposable income and a positive credit history. This is most likely to be a close friend or family member, who’s willing and able to take over repayments if necessary. As long as they are aware of their legal obligations to repay the loan should you default, they need do nothing else to guarantee the loan. And once you get your cash, you can always buy them a drink to thank them!
Acting as a guarantor can help the borrower, not only to obtain the funds they need, but could also help the borrower to improve their credit rating. This could in turn have a positive impact on the way their finances are looked at in the future. Your guarantor must be at least 18 years old. As discussed, traditionally guarantors needed to be homeowners, but this is not the case anymore, and non homeowner guarantor lenders may be able to help. In order to qualify for a guarantor loan the following criteria must be met:
If you need some extra money, but are unable to obtain a short term loan or you cannot afford to repay the loan in a short space of time, then you can apply for a guarantor loan and receive the money within 24 hours.
There are however a few things you should consider before taking out a guarantor loan.
The guarantor is responsible for the loan, so any possible default can put the guarantor’s home at risk. This could then lead to them losing their home if the loan is secured against their house.
A guarantor has no way out of an agreement once it is finalised. It’s not possible to pull out, without the borrower paying off the debt in full, or refinancing by taking out another loan without the guarantors name on it. When you consider that a guarantor loan can have a five year term, there is quite a lot of potential for things to go wrong.
A guarantor loan is a huge commitment for both the guarantor and the borrower. If possible, instead consider a short term loan. It’s always best to borrow as little as possible, for the shortest time. Neither will you jeopardise your friendship or family’s security if you cannot repay.
Whatever you decide, make sure you consider all your options. You’re the best person qualified to know what sort of credit is best for you!