Guarantor loans are fixed term loans available to people with poor credit ratings and are in serious need of funds to cover urgent expenses.
These unsecured loans may range between one year to five year duration, though this depends on the loan providers.
Acquiring a guarantor loan so as to account for your poor credit rating demands you seek someone’s consent that is to act as a guarantor for you. Such a guarantor is like insurance on your creditor’s behalf. This is because should you fail to repay your loan on time, the guarantor will be responsible for such loan repayment.
Having consulted a guarantor and they have legally consented, they are bound by the loan agreement, and as a result, they authorize their account to be debited in case you are unable to repay or pay at the scheduled time.
Huge amount of money can be obtained from guarantor loans with interest rates around fifty per cent. Essentially, the interest of guarantor loans is lower when compared to payday loans.
It is not just anybody that can qualify as a guarantor for loan agreement. A qualified guarantor is the one who is above twenty- one years old with a good credit history. They must prove to your creditor their legitimate ability to cover you, should you miss your payments. They do this by providing their financial details. In short, anyone who is capable and willing to repay your loan in the event of your failure can act as your guarantor. Such a person may be your friend, family or even an organization.
Below are some top benefits of guarantor loans.
1. Available to people with poor credit history
Guarantor loans are designed to assist people with poor credit history. It is easily accessible as long as you can get a guarantor with a good credit score and above twenty one years of age. In addition to this, you should not be bankrupt at the time of seeking the loan.
2. No limitation to borrowing
Large amount of money can be borrowed since a guarantor with a good credit history has provided safety in case there is a problem with meeting the repayments.
You can borrow large amount if your guarantor is a home owner. This is highly advantageous especially when you require funds to cater for expensive projects.
3. The process is fast
An advantage of guarantor loans is the quick approval of the process. Upon successful application and availability of a guarantor, the process typically takes less than a day.
4. Flexibility
Guarantor loans are flexible as the amount you borrow and the amount you can repay subsequently determine the terms of repayment. Unlike the payday loan which has a deadline of thirty days, guarantor loans allow longer term of repayment.
5. Less problematic
Problems associated with guarantor loans are fewer compared to other form of loans. Statistics revealed by Citizens Advice revealed that between 2012 to 2015, five hundred problems are received from guarantor loans as compared to payday loams which recorded twenty nine thousand problems. This statistics shows that guarantor loans are less problematic compared to other loan types.
6. Acts as a safety net
Guarantor loans act as a safety net for individuals who for one reason or the other are unable to repay their loans by shifting the burden to the guarantor who will shoulder the responsibility of such repayment.
7. Absence of credit check
One of the greatest merits of guarantor loans is the absence of credit check as a requirement of obtaining it. While there is an involvement of a primary check, it is not a crucial requirement.
8. Boosts your poor credit score
Guarantor loans create an opportunity for you to improve your credit score via your guarantor who has a high score. In the event that your guarantor is able to maintain the monthly loan payment, the credit reporting agencies will receive a report from your creditors and hence, your poor credit score will receive a boost.
In conclusion, guarantor loans can be of immense help for people with a poor credit history who are in urgent need of funds. Prior to applying for guarantor loans, you should assess your present and future finances to ascertain your possibility of repaying the loan on time. In addition, it is important to discuss this issue with your proposed guarantor so that proper arrangement regarding the terms and conditions of the loan will be established, thereby averting conflict. Guarantor loan is worth considering if you are able to meet all your repayment and have a person who is willing to act as your guarantor.
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