If you need a short term loan but don’t have an excellent credit history, a guarantor may be able to help. However, keep in mind that failure to repay the loan could have an adverse effect on both of your credit scores.
What is a guarantor loan?
A short term guarantor loan is a type of personal loan that you can obtain with the help of someone else. This could be your friends or family members who will ‘guarantee’ repayments to a lender if you find it difficult to manage them yourself.
These loans can be an advantageous option for people with poor credit or who lack sufficient assets to secure a loan. Having a guarantor adds extra strength to your application, potentially making lenders more willing to grant you access to necessary funds.
Guarantors should exercise caution as this could put them in financial strain if the borrower stops making payments. Responsible lending regulations protect both guarantors and borrowers alike, requiring lenders to verify you can afford repayments and give you ample time for them to be made.
How do guarantor loans work?
If you need a short term loan but can’t get approved on your own, guarantor loans could be the ideal solution. They’re an increasingly popular option in the UK and provide an effective way to get money into your bank account quickly.
Guarantors are individuals who will co-sign your loan agreement and assume responsibility for making repayments if you default on the loan. They should have an excellent credit history and be reliable.
They should also be able to afford the monthly payments without going into debt. To do this, they need a reliable income and assets that can back up the loan.
Lenders often request a guarantor to be either your parent, spouse or close family member who can demonstrate sufficient wealth to cover mortgage and repayments should you default. While this poses a risk to the lender, it could mean more favorable approval rates for loans.
How can I get a guarantor loan?
Short term guarantor loans are an option for those who need money but lack sufficient income or credit history. These loans can also be an effective way to build up your credit score if you stay on top of repayments and manage your debt responsibly.
Guarantor loans work the same way as any other loan: you apply to the lender and provide your personal and financial details. Once they determine if you meet eligibility requirements for the loan, they will either approve or deny your application.
Once you submit an application to a lender, they will conduct a hard credit search on both you and any guarantor nominees. This could leave a mark on your record so be sure to read all terms and conditions thoroughly prior to agreeing to them.
Guarantors can be any family member or friend who will guarantee payment of the loan in case you don’t. Typically, they’ll need to present some form of identification which can either be scanned or sent via postal service.
Are guarantor loans available to me?
If you need a loan and have poor or no credit history, guarantor loans could be your ideal solution. They are accessible to anyone with good credit who can produce a guarantor – usually a family member or friend with excellent credentials.
These loans can be an excellent source of emergency funds when needed. They function similarly to any other personal loan – you borrow money from the lender and repay it in monthly instalments with interest attached.
However, you’ll need a guarantor to assist with your payments if any are missed. This is because they are legally responsible for repaying the loan if you can no longer make your repayments.
Guarantoring your loan can be an excellent way to increase your chances of approval, but it’s essential that you do some research and compare available options before applying. Make sure the APR (annual percentage rate) on the loan you apply for is low so that you don’t end up paying too much in interest charges.