Unfortunately since this post was published we no longer have access to any guarantor loan lenders. The information contained in this post is still valid and worth a read if you are considering taking out a guarantor loan.
If you have no credit history and can’t get approved for traditional loans, guarantor loans are an option to consider. Need money and have someone who will put up their own credit rating as collateral? You are now in Guarantor Loan country. Here are some of the benefits of Guarantor Loans so you can decide if they are right for you or not.
What is a Guarantor Loan?
A guarantor loan is a kind of personal loan that’s secured by a third party. It’s them who are responsible for repayment if you default. The advantage is that a good credit history can be useful in getting better interest rates. Guarantor Loans can be more difficult to obtain if the non-guarantor has a bad credit history. Before taking out one of these loans, it’s wise to understand both their pros and cons. One of the major drawbacks which is worth considering from the outset is what happens if things go wrong and you can’t pay? Is your relationship with your guarantor strong enough to withstand financial shocks?
What do you get with a Guarantor Loan?
You get a Guarantor Loan from a commercial lender such as a bank, credit union or other financial institution. Your lender will conduct an investigation into your credit history. This will determine whether you are a suitable candidate for their loan product. If your application is approved, then they may request that someone guarantee your loan by signing on to be obligated to repay it if you fail to do so. Usually a person who has a good credit history can act as a guarantor without any issues. However, there are some limitations as well. For example, what happens if you lose your job and can no longer afford your payments? This could be problematic because it would reflect poorly on your sponsor’s credit history – causing them difficulty in gaining future loans.
More Pros than Cons?
If you have bad or no credit, there’s a good chance that you haven’t had many choices in terms of credit options. But, if you have someone with a stellar financial history willing to back your loan, you may be eligible for a guarantor loan. Here are some of the benefits of guarantor loans. You don’t need perfect credit. It can be hard to find a lender who will work with you if you have bad credit. This is because lenders want to protect themselves from getting stuck paying off bad debts. With guarantor loans, however, things change as long as you have someone willing to vouch for your ability to pay them back (i.e., your guarantor). Your guarantor can even get involved in helping set up repayment plans so that both parties stay on track.
Final thoughts
Starting out in life is a challenge for many young people. If you’re lucky enough to have family members (or very good friends or partners) with a good credit history, you may be able to use them as guarantors for your personal loan. If you default on payments, then your lender can pursue legal action against both yourself and your guarantor. We hope it will never be the case that your lender has to take any form of action against you or your guarantor.
We hope this helps.