As the economy continues to struggle, the need for loans will continue to increase. While those with a good credit history may go to their bank or mainstream lender in search of credit, those with poor credit history won’t have this option.
Guarantor loans were first launched with the aim of bridging the gap between the strict criteria high street loans and the high interest doorstep lenders. Despite their gradual rise in popularity, many are still unaware of exactly how guarantor loans work and therefore have a number of qualms and queries regarding the product.
Throughout this article we are going to discuss some of the most popular guarantor loan related questions. Without further ado here are 5 FAQs regarding guarantor loans:
1. What is a guarantor loan?
If you've never heard of guarantor loans then you’re probably wondering what they are. In short, they are a type of unsecured loan that are designed to help those who have been unable to get credit through traditional sources. They allow those with a less than perfect credit history borrow up to £7,500 (£10,000 in some cases) and spread the repayments over a loan term that suits them.
Lenders are able to do this because of the support of a third party individual known as the guarantor.
2. What is a Guarantor?
A guarantor can be a friend, family member, work colleague or just about anyone who is willing to back up the application and guarantee to pay any repayments that aren’t made by the applicant. Unlike the applicant, the guarantor must have a good credit history and they must not be residing with the applicant. Most lenders will require the guarantor to be a homeowner however some may now be able to accept tenants.
3. What are the responsibilities of the guarantor?
As I briefly outlined above, the guarantor becomes responsible for the loan repayments if the applicant ever fails to pay. Providing the applicant makes each loan repayment in full and on time the guarantor will never be contacted. If both the applicant and guarantor fail to make the repayments of the loan then missed payment and defaults may be reported to credit reference agencies, which will ultimately affect both of their chances of getting credit in the future.
4. How long do guarantor loans take to process?
Despite there being a number of checks involved in the guarantor loan process, lenders are still able to pay the loan out the same day as you apply. However, the speed of the process is largely dependent on your ability to meet the requirements of the lender. Occasionally, lenders will require some supporting documentation, if you’re unable to provide them; the lender will be unable to pay the loan out.
5. What can guarantor loans be used for?
Guarantor loans can be used for almost any personal purpose. Arguably the most popular use for them is consolidation of high interest credit. Many who rack up large balances on credit cards or have outstanding payday loans choose to take out a guarantor loan in order to pay off the outstanding debt and consolidate it into one fixed monthly repayments. Many also use the loans to fund the purchase of a car or holiday or to help with the cost of wedding planning.
Hopefully having read this article you've furthered your understanding of guarantor loans as a product and its place in the unsecured loan market. We regularly publish content regarding guarantor loans so if you’d like to learn more about them – check out our other posts.
Guarantor loans were first launched with the aim of bridging the gap between the strict criteria high street loans and the high interest doorstep lenders. Despite their gradual rise in popularity, many are still unaware of exactly how guarantor loans work and therefore have a number of qualms and queries regarding the product.
Throughout this article we are going to discuss some of the most popular guarantor loan related questions. Without further ado here are 5 FAQs regarding guarantor loans:
1. What is a guarantor loan?
If you've never heard of guarantor loans then you’re probably wondering what they are. In short, they are a type of unsecured loan that are designed to help those who have been unable to get credit through traditional sources. They allow those with a less than perfect credit history borrow up to £7,500 (£10,000 in some cases) and spread the repayments over a loan term that suits them.
Lenders are able to do this because of the support of a third party individual known as the guarantor.
2. What is a Guarantor?
A guarantor can be a friend, family member, work colleague or just about anyone who is willing to back up the application and guarantee to pay any repayments that aren’t made by the applicant. Unlike the applicant, the guarantor must have a good credit history and they must not be residing with the applicant. Most lenders will require the guarantor to be a homeowner however some may now be able to accept tenants.
3. What are the responsibilities of the guarantor?
As I briefly outlined above, the guarantor becomes responsible for the loan repayments if the applicant ever fails to pay. Providing the applicant makes each loan repayment in full and on time the guarantor will never be contacted. If both the applicant and guarantor fail to make the repayments of the loan then missed payment and defaults may be reported to credit reference agencies, which will ultimately affect both of their chances of getting credit in the future.
4. How long do guarantor loans take to process?
Despite there being a number of checks involved in the guarantor loan process, lenders are still able to pay the loan out the same day as you apply. However, the speed of the process is largely dependent on your ability to meet the requirements of the lender. Occasionally, lenders will require some supporting documentation, if you’re unable to provide them; the lender will be unable to pay the loan out.
5. What can guarantor loans be used for?
Guarantor loans can be used for almost any personal purpose. Arguably the most popular use for them is consolidation of high interest credit. Many who rack up large balances on credit cards or have outstanding payday loans choose to take out a guarantor loan in order to pay off the outstanding debt and consolidate it into one fixed monthly repayments. Many also use the loans to fund the purchase of a car or holiday or to help with the cost of wedding planning.
Hopefully having read this article you've furthered your understanding of guarantor loans as a product and its place in the unsecured loan market. We regularly publish content regarding guarantor loans so if you’d like to learn more about them – check out our other posts.