Guarantor Loans All You Need to Know
Guarantor Loans All You Need to Know
Guarantor Loans All You Need to KnowThe recent increased popularity of guarantor loans in the UK is mainly because tenants and non-homeowners with credit problems, are finding it difficult to arrange finance without a guarantor. This is as a result of the credit crunch and the fact that the lenders have all tightened their lending criteria, especially if there is a history of poor credit.What is a Guarantor Loan?A guarantor loan is a form of unsecured loan where an agreement is made between a third party and the Lender that ensures that the loan will be repaid, should the borrower be unable to meet the repayments. The agreement is enforcable by law.Who Are They Best Suited To?For the reason that a guarantor loan is unsecured, they are available to anyone over the age of 18 better suited to:-Non-homeowners, whether private tenants or local authorityStudents or people living at home with family or with relativesHomeowners with little or no equity in their propertyPeople with a poor credit record or have been refused credit elsewhereWill a Bad Credit History Affect Me?No. With a guarantor loan, there is no credit check carried out on the applicant, but one is carried out on the guarantor, therefore the guarantor needs to be a homeowner with a healthy credit record. Having a porr credit history will not necessarily preclude you from taking out a guarantor loan. On the other hand if you are in an IVA, debt mangement plan or bankrupt you will not qualify for a loan.How Much Can You Borrow?With a guarantor loan you can borrow up to 5,000 depending on individual circumstances, over a period of 48 months (4 years)Who Can Act as a Guarantor?Anyone can act as a guarantor, but they must be a homeowner and have a good credit history. The guarantor is not linked to the loan so the debt does not stand as a debt against their name, nor does it affect them in obtaining credit in the future.A guarantor can be a member of your family (other than spouse), a work colleague, a friend or anyone else that is will to assist you in getting a loan. One thing that can gain the confidence of a prospective guarantor is for the one borrowing the money (debtor) to sign an indemnity. This is a contract that exists between the debtor and the guarantor which states that the debtor will repay the guarantor, should the guarantor be asked to pay back the loan on behalf of the debtor.How Long Before My Loan Pays Out?The time it takes will be dependent on how long you take to provide all the relevant documentation. Once the lender receives the required paperwork back from you, it will take around 3 - 5 days for you to receive the loan.In SummaryA guarantor loan can be useful if you need to arrange finance and you have a bad credit history. However before you sign the paper work you should make sure that you fully understand what you are getting yourself into. It is an expensive way to borrow money, and if you are unable to maintain the payments your guarantor will be required to pay the loan back on your behalf.