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Important information about unsecured, guaranteed loans

With credit as tight as it is these days, may people have problems borrowing from banks. People who have a poor credit score are much better suited for guaranteed loans than other types of loans. However, the main disadvantage for customers is that interest rates are comparatively higher than other loans. Lenders use this method to compensate for the higher risk of granting loans to people with low credit.

Applying for a guaranteed loan is a relatively straight-forward process. One of the most important conditions of these loans is that they require a guarantor to act as an insurer for the borrower if they default on repayments. This is fairly similar to a situation where a student or young professional is renting a property for the first time. If they have no credit history, they will have to ask a family member or a friend to act as their guarantor for the landlord.

A guarantor will need to have an excellent credit history and will usually be aged 21 or over. People with better credit ratings are less likely to fall into difficulty when they repay their loans, since failing to make scheduled payments for a loan or a credit card is what leads to a low credits core in the first place.

The major risk of guaranteed loans is that they will wield a great deal of pressure on the guarantor if the borrower is not in a financial position to make the repayments on time. However, the benefit of these loans is that people are much less likely to end up in situations where their property has to be repossessed because of unpaid instalments. This was a common occurrence before the credit crunch, when new regulations were put in place to prevent lenders from giving money to individuals who could not realistically afford to pay the loan back.

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