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All you need to know about guarantor loans

Bad credit solutions

If you have bad credit or if you don't have any credit history (for example, you are a student living away from home for the first time), you may find it difficult to obtain a loan. Some people opt for bad credit loans - loans that charge a very high rate of interest to reflect the risk that the lender is taking on you. Guarantor loans are often a more affordable option.

Borrowing with guarantor loans

There is a wide variety of different loans available through this set up: personal loans, car loans, student loans and even mortgages are lent on the basis of the borrower having a good guarantor.

The guarantor

The guarantor (usually a friend or family member of the borrower - but can also be a business or organisation) agrees to "guarantee" the loan. This means that if the borrower fails to make the payments, the guarantor will step in and pay the debts. In order to be a guarantor, you need to have a good credit history.

The benefits

Guarantor loans are a route to securing credit that you would not have been offered if you applied on your own. You may also be offered a larger sum of money and your interest rates may be lower.

Where to find guarantor loans

Most high street banks and lenders offer guarantor options. It's often a good idea to call into your branch to have a chat with a lending specialist, as they will be able to consider your personal circumstances and advise on the best course of action for you.

There are also a number of lenders that specialise in guarantor loans. For example, guarantorloansonline.co.uk offer fixed rate guarantor loans of between £1,000 and £5,000. Typical APR is high compared to standard loans (53.8%), but much lower than the type of interest rates offered by bad credit and payday lenders.

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