Introduction
Over the past 5 years, guarantor loans have proved a popular choice amongst those with a poor credit history. There are various reasons why guarantor loans have gained such popularity; firstly, lenders are able to offer up to £10,000 at rates much lower than other bad credit loan options, but also because they can be used as a way of boosting your credit score and indeed improving your chances of gaining lower rate credit in the future.
The role of the guarantor
One of the main reasons guarantor loans are considerably cheaper than instalment or payday loans is because they require the back up of a third party individual known as the guarantor. The guarantor essentially supports the application and guarantees to pay the monthly repayments should the applicant ever fail to do so. Providing the applicant is able to keep up with the repayments throughout the loan term the guarantor will never be contacted.
Choosing the right guarantor
Despite this, it is extremely important that you choose the right guarantor. Throughout this article we are going discuss exactly how you can do so to ensure that you never run into any problems once the loan is paid out.
Trust
The first thing that you need to confirm when considering who to choose as guarantor is whether there is a mutual trust. As the applicant you need to trust that the guarantor to make any payments on your behalf if you are unable to do so. As guarantor they need to trust you to make all the repayments on time, and if not provide adequate reasoning as to why not.
Frequent contact
Anyone can stand as guarantor on a loan application however it is important that you choose a guarantor who you are very close with and are in regular contact with. Having frequent conversations regarding your finances and the progress of the loan will avoid any friction if the guarantor is ever required to make a payment.
Fitting the lender’s criteria
The chances are you've probably got a few candidates in mind that’d make suitable guarantors in your eyes. This is a good start, however just because they suitable in your eyes, it doesn't mean they’re going to be suitable in the lenders eyes. For this reason, your next job is to check your candidates fit the lenders criteria. You’ll find the lenders criteria stated on their website, different lenders will have different criteria’s however generally they will require the guarantor to:
· Be between the ages of 18 and 75
· Have a good credit history
· Own their own home
· Be earning enough to comfortably afford the repayments of the loan
The lender will carry out various eligibility checks on the guarantor however by ensuring that they meet the initial basic criteria points you’ll avoid getting knocked back at the very early stages of the application.
Making the application
Having chosen a suitable lender it is now time to fill in the application. It’s a great exercise in trust if you fill in the application together, reading the relevant documentation and making sure you are both fully comfortable and aware of the finer points of the agreements will dramatically reduce the chance of misunderstandings further down the line.
Over the past 5 years, guarantor loans have proved a popular choice amongst those with a poor credit history. There are various reasons why guarantor loans have gained such popularity; firstly, lenders are able to offer up to £10,000 at rates much lower than other bad credit loan options, but also because they can be used as a way of boosting your credit score and indeed improving your chances of gaining lower rate credit in the future.
The role of the guarantor
One of the main reasons guarantor loans are considerably cheaper than instalment or payday loans is because they require the back up of a third party individual known as the guarantor. The guarantor essentially supports the application and guarantees to pay the monthly repayments should the applicant ever fail to do so. Providing the applicant is able to keep up with the repayments throughout the loan term the guarantor will never be contacted.
Choosing the right guarantor
Despite this, it is extremely important that you choose the right guarantor. Throughout this article we are going discuss exactly how you can do so to ensure that you never run into any problems once the loan is paid out.
Trust
The first thing that you need to confirm when considering who to choose as guarantor is whether there is a mutual trust. As the applicant you need to trust that the guarantor to make any payments on your behalf if you are unable to do so. As guarantor they need to trust you to make all the repayments on time, and if not provide adequate reasoning as to why not.
Frequent contact
Anyone can stand as guarantor on a loan application however it is important that you choose a guarantor who you are very close with and are in regular contact with. Having frequent conversations regarding your finances and the progress of the loan will avoid any friction if the guarantor is ever required to make a payment.
Fitting the lender’s criteria
The chances are you've probably got a few candidates in mind that’d make suitable guarantors in your eyes. This is a good start, however just because they suitable in your eyes, it doesn't mean they’re going to be suitable in the lenders eyes. For this reason, your next job is to check your candidates fit the lenders criteria. You’ll find the lenders criteria stated on their website, different lenders will have different criteria’s however generally they will require the guarantor to:
· Be between the ages of 18 and 75
· Have a good credit history
· Own their own home
· Be earning enough to comfortably afford the repayments of the loan
The lender will carry out various eligibility checks on the guarantor however by ensuring that they meet the initial basic criteria points you’ll avoid getting knocked back at the very early stages of the application.
Making the application
Having chosen a suitable lender it is now time to fill in the application. It’s a great exercise in trust if you fill in the application together, reading the relevant documentation and making sure you are both fully comfortable and aware of the finer points of the agreements will dramatically reduce the chance of misunderstandings further down the line.