subject: How Do Guarantor Loans Actually Work? [print this page] As we see the green shoots of recovery in most sectors of the economy, it may seem reasonable to expect that credit is easier to obtain as a result. However, this is not the case. The UK has been badly affected by the way credit was handed out in the past, banks are therefore much more cautious when it comes to lending cash. One option that is available to those seeking credit, however, is guarantor loans.
For those who have not heard of guarantor loans, the term might seem like yet another complicated financial term. But as we'll examine in this article, this is not the case. Guarantor loans are loans given out to people who can get someone else to guarantee the loan. This person may be a friend or relative, and is often quite a close family relation. By guaranteeing the loan, the guarantor is agreeing to fulfil the financial obligation should the person obtaining the loan default for whatever reason.
The person acting as guarantor must of course have a good credit rating in order for such a loan to be taken out. It is important that this person realises the gravity of the agreement, as their own financial stability will be at risk should they be forced to make these repayments. Depending on the amount of money involved, it might, for example, put the person's home at risk in the most extreme circumstances.
Guarantor loans do not depend upon the person in question (that is, the person who will benefit from the money) having a good credit rating, so even if they have run up huge bills with loans, overdraughts and credit cards, this kind of loan can offer some hope.
If the person who is guaranteeing the loan wishes to have a little more security, an agreement can be entered into that involves the person benefitting from the loan agreeing to repay the guarantor should they default and compel them to repay for them. While this would be a long term payment, it is true to say it gives some comfort.
Guarantor loans have become increasingly common as the person who takes the loan out is much more likely to repay the loan as the financial security of their close friend or relative is at risk if they fail to do so.
There are various firms across the UK offering guarantor loans and a basic search on the internet will find them.
