What is a guarantor loan?
A guarantor loan is essentially a system whereby you borrow money off a certain institution and you select someone to be your guarantor. This means that if you fall short on the payments, the guarantor will pay the outstanding amount.
Who are guarantor loans for?
Guarantor loans are designed for people who have a steady income to pay off the loan, but don’t have a good enough credit rating for the bank to actually lend to them. For example, young people who are earning but haven’t had any loans before may need a guarantor loan if they want a deposit on a house. The bank can see they can afford to pay it back but need the re-assurance of a second party to make it viable.
Can you get a guarantor loan if you have bad credit?
One of the main reasons that the guarantor loan exists is to allow people with bad credit ratings a chance to borrow money. The credit rating of the borrower isn’t considered, only that of the guarantor. The current income of the borrower may be considered however when deciding the amount that can be borrowed as well as the interest rates.
Who can qualify as a guarantor?
There are few different qualifications that the guarantor must meet before the loan can be approved.
- 1. Different companies offer different rules on age but the generally the guarantor must be between the ages of 18-75
- 2. The guarantor must have some form of income, whether it be full-time, part time or pension
- 3. The guarantor must have a good credit history
- 4. They must have separate finances from you
- 5. Your guarantor can be one of your friends or a member of your family, as long as they are not financially linked to you (for example, your guarantor could not be a spouse with whom you share a bank account or mortgage)
Will the guarantor have to put up any collateral?
In most instances no, the guarantor’s private possessions are not at risk should the borrower miss payments. In some instances though, if the guarantor is a homeowner it can increase the amount that can be borrowed
Who can give me a guarantor loan?
There are a few companies who offer these sorts of loans. UK credit, Amigo loans and buddy loans are some of the more well-known providers.
Will the interest be higher than a traditional loan?
The interest on guarantor loans will generally be higher than that with a normal loan. We offer a market leading 39.9% APR. The APR on these kinds of loans market wide will generally be between 40-60% so careful consideration should be taken before taking one out.
What should I consider before becoming a guarantor?
If you’re considering becoming a guarantor there are several things you should consider. If the payments are missed you are legally responsible to cover the costs and both you and the borrower can be taken to court. Therefore, you need to make sure it is someone you trust as well as someone who you think will be able to make their monthly payments. As a guarantor you might well take some consideration into the loan itself, in the interest of yourself and the borrower it would be wise to check any details and understand the terms full before complying.