Guarantor Loans Information Library

GUARANTOR LOANS

Every day, we're told that lenders are becoming tougher and tougher – making it harder than ever to get the loan you need. Bad Credit Good Solutions lists loans which are designed for people who want an alternative – loans which are offered by specialist lenders.

Having a low credit rating doesn't need to stop you from getting a loan, and here you can find the best places to get the right one.

What is a Guarantor Loan?

A guarantor loan is a personal (or unsecured) loan for someone who might have had problems with credit in the past. Here's how this loan works:

You, the borrower, give the lender proof of a guarantor – a person who can step in if you suddenly have problems with your repayments. That guarantor will confirm that they will pay off your debt in case you aren't able to.

Who can be a Guarantor for me?

Almost anyone you know can be your guarantor, it doesn't have to be relation or close friend. So, you could even as a neighbour or colleague. But don't forget that they will need to be happy to agree to confirm to pay off your loan for you if you encounter any problems with repayments.

Here are requirements for the guarantor:

• Should understand their role
• Generally must be at least 21 years of age
• Generally should be in full time employment

When the lender assesses your application, they will take into account the credit rating of the guarantor. If problems crop up with repayments, they will be liable to repay the loan. They are now responsible and if further problems develop then it is their credit rating on the line – you are exempt.

Therefore, a potential guarantor should think about whether they are happy to risk their credit score for future borrowing.

How Much can I Borrow?

You can typically borrow up to around £3,000 as long as you are able to meet the lender's criteria.

Who is Suitable for a Guarantor Loan?

guarantor loans are unsecured (personal), so it is not secured against your home or other large asset. So, it could be a suitable loan for a wide range of applicants – tenants (even local authority tenants), people who live with their family or parents. Even homeowners who don't have equity in their home can take a guarantor loan.

Remember: a low credit rating shouldn't stand in your way, because guarantor loan companies are highly unlikely to carry out credit checks on applicants. You can check if they do before you apply – most won't.

So, even if you have defaults or CCJs, you could get the loan! Other suitable borrowers could be students, people claiming state benefits or unemployed people.

How can I get a Guarantor Loan?

First, you will need to find a willing guarantor. This could be pretty much anyone (see above), but make sure they can afford to bail you out and are willing to do so! They should have a good credit rating. If they don't, then there is a risk that the loan application will be turned down.

Most guarantor loan companies offer a simple online service – just take a look at the ones listed on our website. They will offer a simple online application on which you provide your essential details and information about the person who has agreed to be your guarantor.

Next, the loan company will have a quick look at your information and work out a good repayment plan, interest rate and how long the loan should last for. The application will often be based on the credit rating of the guarantor – not yours.

And that's it! Once the loan has been approved, you will receive your loan and set up a repayment method (usually Direct Debit).