Guarantor Loans in the UK

A guarantor loan might be an alternative for people with a poor credit score, who found it difficult to get approved for a loan product. But it's worth noting that you might find yourself having to pay more than the original borrowed amount in interest, on top of the repayments you make monthly.

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Who requires a guarantor loan?

These loans are intended for those who have poor or bad credit. A borrower who is seeking to enter a guarantor loan usually does so as their last option. Since the borrower has poor credit, this loan might be of great help to them.

One of the advantages of getting this loan is that payment is done on time by the borrower, their credit score can in fact increase. It's fast way that a person with bad credit can get out of the cycle of poor credit. By bettering their credit score, the borrower will get access to good finance choices later on.

If a borrower is missing the repayments because of a series of high-interest loans, this can hurt ones credit score. When one uses a single guarantor loan to consolidate them, they can control their finances well.

Repaying a guarantor loan

These loans are often made each month. As guarantor loans are applied for over the space of many years, the installments can be very minimal. There are usually no charges for repaying a guarantor loan ahead of time.

If a pay back is missed, many lenders continue attempting to get in touch with the borrower to collect the payment. Many lenders see contacting the guarantor as a last attempt.

The credit score can be adversely affected if the borrower defaults on a payment. This can also occur to the guarantor as well.

How do you qualify?

You are eligible for guarantor loans if you fit in any of the following categories:

•    Student

•    Have a poor credit history, or defaulted on previous loans, cards or accounts

•    Part-time worker

•    Have moved address several times

•    Non-homeowner

This is not a comprehensive list; however, these are the main groups of those who may take advantage of a guarantor loan.

Important points to note before taking a guarantor loan  

If you fail to pay back your loan, the guarantor will be forced to do so, together with the interest and sometimes other fees that may be considerable. You may find that in case your guarantor needs to pay up, they lose their money and you might also lose them. Always be absolutely certain that before you borrow money, you can afford to pay