Guarantor Loans Basics
If you have bad credit history, expect to struggle or be outright rejected when applying for personal loans from banks and mainstream lenders. Because of your history of arrears, defaults or maybe ccjs, lenders often see you as high risk. Fortunately, guarantor loans came about offering borrowers a chance to avail a personal loan much faster and a lot easier. But even if the financial product is easily accessible, it pays to know the basics.
What is a guarantor loan?
A guarantor loan is a type of unsecured personal loan where one of the main requirements is a guarantor with good credit. The guarantor can be anyone from your family member to a friend or a colleague. He or she just needs to provide proof of income and agree to co-sign the loan application with you.
Most lenders usually require guarantors to be a homeowner or a mortgage payer. Unfortunately, many borrowers are still having a hard time finding an eligible guarantor. To address the problem, some lenders are now offer non-homeowner guarantor loans.
How much and how long?
Because there is a guarantor guaranteeing your repayments, loan amount and term are more flexible. Provided that you and your guarantor meet the requirements, you can borrow from £50 up to £50,000 at repayment periods starting from one month to 36 months.
Who is it for?
Guarantor loans are designed for people with bad credit. If you've ever been refused a personal loan before, this is the type of funding for you. Again, you only need to find a guarantor to back you up with your application to avail the product. Borrowers who is 18 years or older and a resident of UK are welcome to apply for guarantor loans.
How much does a guarantor loan cost?
In terms of interest rate, guarantor loans offer an average Representative APR or annual percentage rate of 50%. If you borrow £5,000 at a repayment period of 2 years or 24 months and the Representative APR is variable at 49.9% while the interest rate per annum is 41.16%, your repayment monthly fee will be £309 or roughly £7,418 in total.
Should you go for it?
While guarantor loans are not the cheapest personal loans offered by the lending industry, it is one of the less expensive compared to other options such as payday loans and logbook loans. You should go for it if you need quick cash and you know you can handle the repayments until end of term.