Your credit history gets affected due to your financial struggle. Both you and the creditor know that. Whenever you request an online loan quotation you are then reminded about credit history due to which your request is either accepted in stringent term or it is rejected. Due to rigid lending criteria since the 2008 year’s financial crash the situation would likely be a lot worse. It will basically forbid anyone having average credit history from securing a bank loan or a loan to be offered at huge rates. Hence there is a solution to this problem which is known as a guarantor loan.
A guarantor loan lets you borrow a loan at competitive rates to improve your credit history if you repay on time. To get your credit history in functioning order, you need two years of timely loan repayments. For a period from 1 to 7 years, you can borrow it in the range of £1,000 to £25,000 and this type of loan is classified as an unsecured loan.
There has been a rapid growth in a various range of personal loans like guarantors classified as an alternative loan option since the financial crisis of 2008. You may find that some of these companies might charge extra if guarantor loan is obtained through different loan brokers. Similarly, you may also look for direct lenders who do not have any hidden charges. Take care that no fees will be added on if you make late payments, so always check this with your guarantor loan provider.
The cost and lack of other options are the primary reasons for peoples gearing towards bad credit guarantor loans. Thereby pledging his or her funds if you are unable to repay the amount borrowed, a guarantor will basically act as a co-signatory on the loan agreement. As long as the one is not financially associated with you, almost anyone can be your guarantor. Hence a loyal colleague, close family friend or even a close family member could be your guarantor.
Let’s Take a Look at More Specific Points:
- Your guarantor must be a resident of the UK.
- Must not be your spouse and must be in the age range of 23 to 74 years.
- If you default then guarantor must accept and give written agreement to make repayments.
- Must have a mortgage or be a property owner or be living with parents.
- You must have a good credit history
- Must provide relevant bank statements and proof of identity.
- Also must have detached finances.
Before Processing the Application
To get further clear-headed, use an online monthly loan repayment calculator. Now for the amount of time you intend to borrow funds, you must forecast your expenditures and income.
Do have a detailed conversation by sitting down with your relative or friend who is going to be your guarantor and also tell them that if you default on the loan; they will be responsible for offsetting your liabilities.
Working of the Process
After successfully obtaining a guarantor loan you will be required to repay in fixed monthly instalments. Your lender sends a report to the relevant credit reference agency every month after a repayment date.
The repayment status will be visible in the monthly reports. The borrower’s credit score would make a marginal improvement if payment is made successfully. But if you continue with irregular repayments, then a guarantor loan cannot save your credit history.
Depending upon the severity of your credit history, the markup would be taken. The rates of a loan are about 50% or an APR range is from 29% to 49% which means loan rates are not cheap. It is not a good thing but it will get your life out of a hole.
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