Categories: Business & Finance

Bad Credit? Here’s How A Guarantor Loan Can Help

September 14, 2015

There are many different types of loans that can help you rebuild your credit, but a guarantor loan has special benefits. These loans are a newer type of loan option made available in the UK for individuals with bad or no credit history. Companies that offer these loans recognise the importance of getting you back on your feet and helping you establish good credit.

What Is It?

A guarantor loan is a special kind of loan in which a lender gives you a loan with a guarantor as a co-signer. The guarantor can be anyone who has a home in the UK, has a consistent income, and is older than 18. In addition to their credit history, guarantors will have to show proof of home ownership and regular income. The guarantor promises to make payments should you be unable to repay your loan or problems arise.

How Can It Help You?

There are many benefits from securing a guarantor loan. Since they were designed to help people with bad credit, lenders do not weigh your credit history as a factor in the application process. The guarantor’s credit history is what is used to determine your approval. This is helpful for individuals who have damaged their credit due to losing their job or being unable to work. Other lenders are less likely to provide loans to people with poor credit and are more likely to reject such applications. On the other hand, a guarantor loan will not reject you for poor credit history.

The same is true for individuals with no credit. Those without any credit history are often penalised by lenders and their applications are turned away. Lenders who offer a guarantor loan want to give people without credit history a chance to establish credit.

Another benefit of a guarantor loan is that it allows those with bad credit to rebuild their credit. Unfortunately, there are not many opportunities that those with bad credit have to rebuild their credit and move forward. They are held accountable long after their time of difficulty. A guarantor loan is one way to demonstrate that you can now responsibly make payments again. As you begin to make payments in a timely manner, your credit will rebuild and you will be back on your way to financial freedom. You will see your credit score and rating improve over time.

We all have times when we need extra cash. Whether it’s an emergency, an unexpected situation, or just limited funds, extra cash can come in handy. A guarantor loan will allow you to have access to a higher amount of cash than other types of loans. You can get loans that will actually help you take care of your financial matters instead of minimal amounts that do not make a substantial difference. A larger loan amount can give you the freedom and flexibility you need to appropriately handle your financial situation. Instead of getting a payday loan or a smaller loan, why not get the larger loan amount you need to get ahead?

Compared to other types of loans offered for people with bad credit, guarantor loans have a lower interest rate. Whilst the interest rate is still higher than those for individuals with good credit, they are still an improvement over other types of loans. Additionally, a guarantor loan does not have hidden and excessive fees. A guarantor loan does not tack on unnecessary fees because of the reliability of your co-signer.

What Does the Process Entail?

Getting a guarantor loan is quick and easy. The process can be done entirely online and a decision can be made within twenty-four hours after the application is submitted. The application process entails the completion of information on behalf of you and your guarantor, including details that will help the review process go quickly. Such details include disclosing your place of employment and your guarantor’s identification, proof of regular income, and home ownership. Your guarantor’s credit history is taken into consideration in the decision-making process.

Unlike other loans, a guarantor loan does not have any additional setup fees to establish the loan and there are no penalties for paying the loan off early. This is a huge benefit that many borrowers appreciate. You do not have to worry about being penalised for being able to pay off your loan early.

Which Lender Should You Choose?

There are more lenders available these days because they recognise the benefit of offering a guarantor loan. Despite this, not all lenders have the same standards, nor do they have all have your well-being in mind. It’s important to remember that a guarantor loan is non-secured, meaning it is not regulated and there are limited standards that companies actually have to follow. As such, it’s important to choose a company that has your best interest in mind and displays professionalism and integrity.

Look for a lender who is straightforward and forthcoming about any fees related to the loan process. Check the background of the lending company and see for how long they have been established. Another helpful resource is to look at customer reviews and ratings of the company. Peruse their website for testimonials in order to get a sense of previous customers’ experiences.

Another factor is availability and customer service. Communication with your lender is essential and being able to contact them should a problem arise is highly important. Therefore, it is recommended to see how easy it is to contact them and get your questions answered.

Work with your guarantor to determine which lender is best for you. Since your guarantor will have a role in the decision-making process, it is helpful to discuss the choice with them as well. Together, you both can come up with the best solution.

In summary, a guarantor loan is a viable alternative to other loan options, particularly if you have damaged credit or no credit. A guarantor loan can help you get the extra cash you need and put you on the path to rebuilding your credit score and rating.

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