If you are in need of a loan, you will likely have done some research of late. It is understandable that most people will first of all turn to their bank when it comes to obtaining credit. This has been the traditional way to obtain funding and finance over the years, but in recent times, many people have found that banks are not willing to provide them with the money that they need.
If you are deemed to suffer from bad credit, you’ll find that finance is very difficult to obtain. Banks tend to avoid providing loans to people with bad credit scores or who have no credit rating. This may seem harsh but this is the way of the modern world and this is how banks decide who will receive money. There are some banks and lenders who will provide funding to people with a low credit score but this usually involves the loan having a high APR.
A loan that has a high APR will be more expensive and cost more money to pay back. In an ideal world, you should be looking for a loan with as low a rate of APR as possible but due to the risks involved with providing loans to people with a bad credit score, the lending company is looking for an incentive to provide the loan. The higher rate of interest is their motivation to offer a loan to someone with a low credit score.
This means that people with bad credit scores can feel victimised when it comes to obtaining finance, but there are suitable loan options for people suffering from bad credit. One option you should hold an interest in is a guarantor loan.
How does a guarantor loan work?
You’ll find that a guarantor loan is similar in nature to an unsecured loan. This is because there is no need for the borrower to offer any collateral and they don’t need to own their own home. A guarantor loan features the presence of a guarantor, someone who is willing to vouch for the applicant to the lending company. The guarantor is usually required to have a positive credit score and many lenders request that the guarantor owns a home or car.
The guarantor guarantees that the loan will be repaid even if the borrower fails to make the monthly payments.
Who can be a guarantor?
Virtually anyone can be a guarantor. The guarantor must be at least 18 years old and a growing number of firms request that the guarantor is under 75 years old or of working age. One block to someone being a guarantor is whether they share any financial responsibilities with the applicant. If the applicant shares a bank account with the person they ask to be a guarantor, this connection will be refused by the lending company.
These are the specific requirements that lenders insist on but there is a need for the guarantor to understand the responsibilities involved with being a guarantor. The guarantor should know the applicant well, and they should be confident in vouching for the person. If the borrower fails to make payments on time and in full, the guarantor will be pursued for payment, and this can have a negative impact on the guarantor’s life and credit score.
What does the guarantor do?
The guarantor’s principle role is to provide a positive credit score to the lender in order to facilitate the loan. The guarantor will likely have to answer some questions from the lender and they will need to sign documents to indicate that they are happy to act as a guarantor. Hopefully this will be all that the guarantor has to do but if the borrower fails to make payments, the lender will turn to the guarantor to receive the remaining payments on the loan.
Can I obtain the money quickly?
Once the loan has been agreed and the lender is satisfied with the applicant and guarantor, the money is usually transferred very quickly, often arriving with the applicant within 24 hours. One of the key benefits associated with online loan applications is the quick turnaround. There is a need to be ready with details and information to speed up the loan application process.
Are there any fees involved with guarantor loans?
There are usually no fees involved with the setting up, applying for or processing of guarantor loans.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.