It is an unfortunate fact but it is being increasingly difficult to find anyone who has not experienced some form of financial difficulty over the past few years. Finding a good loan to try and help people out of a sticky situation has been almost as difficult, however regardless of your current finance situation a realistic and attainable alternative is now available.
Guarantor Loans are unsecured personal loans which have been created for applicants who would struggle to successfully apply for a standard loan. Even if the applicant has a poor credit rating or bad/no credit history, they are still likely to be accessible.
A Different Type of Loan
Available from lenders such as TFS Loans, guarantor loans are a different type of loan which involves utilising a third party who guarantees to continue making repayments should the borrower fail to do so. Often, guarantor loans are chosen when an individual has a bad credit history or no credit history at all as they would generally be viewed as high risk by financial institutions.
However this risk is significantly reduced if a guarantor is willing to take the responsibility of repaying the loan in the event that the borrower defaults and often, the lender will agree to grant a loan.
A Vital Role
When it comes to applying for a guarantor loan, the key difference between this type of loan and standard unsecured loans is that the applicant needs to nominate someone who will support their loan application – this person is called the guarantor. The guarantor can literally be anyone including family (not spouse or partner), friends, work colleagues etc who know the borrower well and will be willing to support their loan application.
It is essential that the guarantor satisfies a number of criteria, such as being a homeowner with a regular income of their own and a good credit rating. Assuming these criteria are satisfied, the application looks far more favourable to the lender and this is what makes an application much more likely to succeed when compared to a normal unsecured loan.
If you opt to apply for a guarantor loan, it is important that you discipline yourself. Not only because you were provided with a loan despite your current credit rating but also because defaulting on the repayments could make your credit rating even worse.
You should be disciplined to ensure all of the required monthly repayments are made on time with any type of loan but in the case of guarantor loans, you must take into consideration that if you fail to pay the loan, it is your guarantor who will be asked to cough up the money. Although they have been put in place to act as a safety net should things not work out, it is not a good practice to let your guarantor pay for the loan when they offered huge help with your loan application!
Benefits of Guarantor Loans
Contrary to popular belief, although the guarantor loan is an unsecured loan, they are generally available at comparable interest rates to other unsecured loans.
Guarantor loans are great for people who need to improve their credit rating or to get a positive credit score behind them. The applicant must be certain that they can afford to repay the loan to gain the benefits this loan provides and as with any type of loan, it can always prove to be beneficial to shop around for the best deals.