What are Guarantor Loans
The recent increased popularity of guarantor loans in the UK is mainly because tenants and non-homeowners with credit problems, are finding it difficult to arrange finance without a guarantor. This is as a result of the credit crunch and the fact that the lenders have all tightened their lending criteria, especially if there is a history of poor credit.
What is a Guarantor Loan?
A guarantor loan is a form of unsecured loan where an agreement is made between a third party and the Lender that ensures that the loan will be repaid, should the borrower be unable to meet the repayments. This agreement is a legally binding contract.
Who Are They Best Suited To?
Because the loan is not secured against a property or car or anything else, guarantor loans are particularly suited to anyone over 18 years of age but particularly:-
Non-homeowners, whether private tenants or local authority
Students or people living at home with family or with relatives
Homeowners with little or no equity in their property
People with a poor credit record or have been refused credit elsewhere
Will a Bad Credit History Affect Me?
No. There is no credit check carried out on the applicant with a guarantor loan, but there is on the guarantor, that is why the guarantor needs to have a good credit record and be a homeowner. Having a porr credit history will not necessarily preclude you from taking out a guarantor loan. However, if you are bankrupt or in a debt management or IVA plan, you will not be able to get a loan.
How Much Can You Borrow?
With a guarantor loan you can borrow up to £5,000 depending on individual circumstances, over a period of 48 months (4 years)
Who Can Act as a Guarantor?
Anybody can be a guarantor so long as they are a homeowner aged 21 + and a homeowner with a clean credit record. The guarantor is not linked to the loan so the debt does not stand as a debt against their name, nor does it affect them in obtaining credit in the future.
A guarantor can be a member of your family (other than spouse), a work colleague, a friend or anyone else that is will to assist you in getting a loan. One thing that can gain the confidence of a prospective guarantor is for the one borrowing the money (debtor) to sign an indemnity. An indemnity is a legal binding contract between the borrower and the guarantor that states that should the guarantor be asked to pay back the loan, the debtor will repay the guarantor.
How Long Does it Take To Get My Loan?
The time it takes will be dependent on how long you take to provide all the relevant documentation. Once the lender receives the required paperwork back from you, it will take around 3 - 5 days for you to receive the loan.
In Summary
A guarantor loan can be useful if you need to arrange finance and you have a bad credit history. However before you sign the paper work you should make sure that you fully understand what you are getting yourself into. It is an expensive way to borrow money, and if you are unable to maintain the payments your guarantor will be required to pay the loan back on your behalf.
About the Author
Steve Smith has worked in the UK finance industry for a great many years and writes for a number of websites including Guarantor Loans Arranged, read more of hos article now at http://www.guarantorloansarranged.com/information/
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