Guarantor Loans in the UK – How do They Work

guarantor-loans4The state of the economy is such that more and more people are being laid off every day. In such a scenario, loans have become a common means for people to meet their financial needs. However, having a bad credit score can make it extremely difficult for a person to get a loan at low interest rates. For such people, an alternative borrowing option that is becoming increasingly popular these days is guarantor loans in the UK. These are unsecured loans which can be obtained from specialist guarantor loan companies at a nominal interest rate.

What do Guarantor Loans Entail?

As its name suggests a guarantor loan requires a guarantor, a person who is capable of repaying the loan if the person taking the loan is unable to repay it himself. This guarantor will have to sign on the terms of the loan alongside the borrower. He would have to supply personal details such as some sort of identification, bank statements, address and a contact number to the lender so that he can be contacted in the event the loanee defaults. The guarantor is usually not contacted or involved during routine loan repayments. He would only be asked to step in if you fail to repay the loan or miss any of your scheduled repayments.

Who Can be the Guarantor

The guarantor can be anybody that is willing to take up this responsibility on behalf of the borrower. For instance, it can be a close friend or a family member who is confident that you will be able to repay the loan. However, it can’t be the spouse or anyone that is financially linked to you. The guarantor must be at least 21 years of age and have a good credit history as well. The company who is offering the guarantor loan is going to check the financial credentials and information provided by the guarantor before issuing the loan. Some companies even require the guarantor to be a homeowner in the UK as well.

How to Get Guarantor Loans

Getting a guarantor loan isn’t that difficult nowadays. There are a number of specialist guarantor loan companies that are willing to offer this type of loan to you. However, each one offers the loan at a different interest rate and might have varying processing times. Some companies offer guarantor loans at a low interest rate but take a lot of time to process the loan request while others take less time in processing the loan but demand higher interest rates. Therefore, it is important that you shop around and compare multiple guarantor loan companies to find out which one among them is offering the best deal to you.

Advantages of Guarantor Loans

There are a number of advantages of guarantor loans but the most obvious one is that they give you the chance to get a loan at a nominal interest rate even if you have a bad credit history. Moreover, repaying a guarantor loan within the due time limit can also help in improving your credit score as well.