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A guarantor loan is a loan that is lent to the borrower on the condition that, if you cannot repay it, then someone else (a friend, family member, etc) is responsible for paying back.
This other person is your guarantor, and is vouching for you on your behalf, to guarantee that the loan will be repaid, no matter what happens.
Guarantor loans are popular for people who have a bad credit history or no history, and who would not normally be offered a loan. These loans offer people an opportunity to borrow money from the bank, regardless of their credit history, as their guarantor is responsible for any missed repayments.
Banks offer guarantor loans as they know that regardless of your situation as a loan-taker, they’ll always be able to get their money back through your chosen guarantor, making it a low-risk loan.
It’s actually relatively easy to apply for a guarantor loan, especially if you already have someone who has agreed to be your chosen guarantor. The only other rules that apply are: you must be over 18 years old, have a UK bank account and be in full-time employment when applying for the loan.
Make sure that when you choose your guarantor, they’re a trustworthy person who you’ve known for a long period of time and has a stable income and good credit history. If your guarantor later decides to change their mind about being responsible for your loan, this can cause complicated issues between you and your lender.
It’s safe to say that guarantor loans aren’t for everyone, especially since they’re mostly popular with people that have low credit scores. But if you do have a low credit score and you can’t find a guarantor, or you don’t want to use one, then there are alternatives that you could make use of.
For example, you apply for peer to peer loans, short-term loans and secured personal loans, though not every bank will offer you these so be sure to do your research before choosing the right one for you.
If none of these options feel right for you, that’s okay, there are more traditional methods that can get you a loan. Some banks can offer you a loan with “borrowing limits” which means they will allow you to borrow money within a set amount of time, much like an overdraft on a current bank account.
Whichever type of loan you choose, always make sure that the repayment plan is one that you can afford. Use Quidco to compare these loans, and find out which one offers you the best and most affordable deal for you.
Finding the right guarantor loan can be difficult, especially as there are many different options online that all claim to offer you similar products.
That’s why it’s so important when applying for a loan that you take your time to compare different options, to find one which deal gives you exactly what you need, whether that’s the set repayment plan they offer or the interest rates on your loan. It's good to be sure of all of these things before you sign the dotted line.
We believe in giving you all the information you need upfront, so you always make the most informed decisions (and ultimately, save yourself a lot of hassle in the long run should you choose the wrong one!).
That’s why our guarantor loan comparison gives you an easy-to-digest guide into what each loan offers and their costs. We’re wary that some lenders have hidden costs, so we’re determined to always help you identify these before it’s too late.
This is one of the most common questions asked by those opting for a guarantor loan and the answer is simple. If you can’t make your loan repayment on time, the bank will ask your guarantor to pay what is owed on your behalf, as agreed before you took out your loan.
This is why it’s important to make sure that whoever you choose to be your guarantor is financially stable enough to be able to make these repayments, and is willing to do so if it comes to it.
Your guarantor has legally declared themselves responsible for your loan should you be unable to repay it. So if they refuse to make repayments, or they can’t, the bank might seek legal action against them in order to get their money back.
Much like with other loan types that you can get, as a guarantor, your credit score won’t be impacted if you keep up with the defaulted repayments. If these are late, or you refuse to pay them, however, this will affect your credit score and can cause future issues when you apply for a loan.
The good news is that your guarantor can be a friend or a member of your family (not your spouse). It has to be someone that you trust to make repayments on your behalf if needed. Guarantors tend to be over 21 but some banks might accept those 18 years and older.
Your guarantor will need to have a current UK bank account and have an impeccable credit history, to show that they can repay your loan for you if you default. We’d suggest that you choose someone that you have known for a long period of time and has a track history of being able to pay independently for their house, a car of any asset of value.
On average, guarantor loans do have higher interest rates than other loans on the market, mainly because they’re offered to people with a bad credit history.
However, the bank will not base your interest rate entirely on your credit history, as your risk is being lowered by your guarantor. In addition, there are ways to lower your rates, like changing the term of your loan, and how much you want to pay back every month.
A lot of people take out a guarantor loan because they need a smaller sum of money than the average loan. Banks usually offer around £1,000 to £15,000 with a guarantor loan depending on your circumstances.
No, you cannot list your spouse as a guarantor as legally you cannot have anyone who is financially linked to you as a loan guarantor.
If you find that you can’t pay back your loan, or you’re going to miss a repayment, then it will be down to your guarantor to pay the necessary funds on your behalf.
If you can’t pay any of your repayments, then it will be the responsibility of your guarantor to completely pay off the rest of your debt to the lender.
If you die before your loan is paid back, it is generally considered that your estate or any assets that you own will go towards paying back your debt.
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