Guarantor Loans
What do I need to know about Guarantor Loans?
A Guarantor loan is one possible solution for customers who have never had credit in the past or have got bad credit and require a loan. There are a great many loans with bad credit tolerence available in the Uk, but the guarantor loan enables customers who have a good character and willingness to pay the opportunity to raise a loan should they need one.
It could be seen as an irony that consumers in the uk who require credit the most are the least likely to get it. If consumers with impaired credit are lucky enough to be offered a facility, they will more than likely be charged a higher rate for the privilege.
Apply for a guarantor loan .
Why do lenders offer you a Guarantor Loan?
Many lenders in the Uk are targeting asset backed finance to give themselves greater comfort and security in the current climate. This move away from unsecured lending is exemplified by the range of available property-backed secured loan and home improvement loans providers, and also the increasing number of niche products such as ones that enable a customer to raise money secured against personal valuables like cars, art & antiques or jewellery & gold.
A guarantor loan could be viewed in a similar vein. If a customer cannot get a loan from his or her bank or doesn't meet the criteria of one of the other large financial institutions in the Uk it doesn't always follow that they have a poor track record of paying back a loan. If a customer hasn't had credit before they may be declined, if they have changed jobs or moved recently they may also be declined.
What type of customer suits a Guarantor Loans?
For customers who have a lower credit score, whatever the reason, are perceived to be a higher risk to banks and finance houses many lenders are therefore simply unwilling or unable to take on this type of financial liability. The applicants are simply rejected and the customer left with few options other than to perhaps consider a guarantor backed facility.
By applying for a guarantor loan this effectively “guarantees” that your loan will be repaid to the lender. The lender is able to protect their exposure by allowing a guarantor to cosign the agreement so that if you, the applicant fails to pay your loan back to the lender they’ll be able to pursue your guarantor also for payment. It gives them a way of mitigating their potential losses and allows them to lend money to those who normally wouldn't qualify for such services.
What else should I know before applying for a Guarantor Loan?
A guarantor loan is most likely not for customers who have a poor track record with credit if they have no genuine intent to improve their situation. It is similar to applying for a job and not being able to supply character references. This type of loan will only be helpful to a customer who can find someone who is deemed a secure and responsible individual to stand guarantor to the loan. The guarantor for the loan is ultimately responsible for the payments should the applicant default, this is the lenders security.
What about finding a Guarantor?
The product is self vetting in this case. Ask yourself, would you stand guarantor unless you were extremely confident that the applicant was going to make payments on the loan? The guarantor generally is going be someone related to the applicant or very close to them or possibly in some cases an employer or landlord. They also need to be in receipt of a regular income and though it is not essential that they are a homeowner it will certainly help. To prevent fraud the guarantor will be sent the proceeds of the loan to pass on to the applicant. This final stage in the process ensures that they are fully aware of their commitment and also verifies their relationship with the applicant.
