Our world’s pretty much run on money and it is normal to run into situations of financial crisis or exigencies when you fall short of funds at hand, and that’s when the loans come to your rescue. The ability to take a loan can be a deciding factor to which kind of loan would best suit your needs. Not having much of a credit history or having a bad credit history can strike off many sources of loan, hence getting a loan can get difficult and if at all you do get loan, it would be based at an extremely high rate of interest. Paying huge amount of interests on funds that you might be needing to solve some of your problems, may actually amplify the problems or bring in new ones like heavy debt.
In order to cater to this segment of borrowers, where there are repayment risk issues, considering past records, a new type of loan has been making its way in the UK – The Guarantor Loan.
Guarantor loans are loans that keep no asset as security and instead mandate a second person to act as a guarantor for the borrower. Such loans bad credit can run over terms of one to five years and you can borrow anywhere between £1,000 to £7,500.
Now, the first question that would come to anyone’s mind is to know whether a guarantor loan is right for them or not. The below mentioned features of a guarantor loan shall help you get answers to this question:
• Major advantages: A guarantor loan works best for people who have a bad credit history and have been rejected by other lenders. The guarantor loan permits you to borrow a relatively higher amount of money than what you would be able to with other types of loans which also aim at people with poor credit history. Another star feature of the guarantor loan is that it can possibly bring your credit history back on track as you make your repayments on time and hence demonstrate your responsibility as a borrower.
• Qualifying criteria: This loan has very basic qualifying criteria like your age should be more than 18 years, you must possess an account with a UK bank from where repayment transactions can be made and you will need to show some substantial proof to support the fact that you are capable of repaying the loan in timely manner.
• Finding a guarantor: Your financial dependants cannot be your guarantors, apart from them, any family member, friend, professional colleague can be your guarantor if he/she is over 21 years, owns a house in UK Loan companies and has good credit history. Your guarantor will undergo normal credit checks, have to provide bank statements, bank details and proof of ID.
• Interest rates: Due to the risk involved in lending funds without much security, the rate of interest for guarantor loans are bound to be higher than the loans where a good credit history is needed. The annual percentage rate (APR) is usually around 50 per cent. It is worth noting that other ‘bad credit’ loans, like payday loans charge APR upwards of 1,000 per cent.
A guarantor loan cannot be a solution for everyone looking for funds, but for those who have a bad credit history and wish to bring it back on track, this is a fantastic solution.