Quantcast
Channel: Guarantor Loans Company
Viewing all articles
Browse latest Browse all 12

Is a Guarantor Loan the Right Option?

0
0

Guarantor Loan Options

As with any finance product there are times when a guarantor loan may be suitable for your needs and times when it won’t be. This article isn’t here to try and offer you advice on your personal situation, but we’ll take a look at some of the possible pros and also cons of a guarantor loan compared to other finance products.

Recently, the BBC’s Money Box programme highlighted some cases when a guarantor based loan may not be the most suitable option and also drew references to things such as the interest rates charged for this type of product, so we’ll go through the main points raised in this programme.

Why Not Borrow the Money Directly From Friends or Family?

If you’ve got a friend or family member who is willing to lend you the money directly (i.e. without a bank or loan company), then you may very well want to take them up on this offer, especially if they are willing to lend you the money “interest free” or with very little interest. However, you should remember that in some circumstances, this could cause unexpected tensions between you and the person lending you the money. For example, the relationship with that person may change; the fact they have lent you money may always be in their mind or yours. Another example could be if you have trouble paying your friend/relative back due to unforeseen circumstances (although you should bear this in mind for guarantor based loans also).

After taking the points above into consideration, you still find yourself happy and can get a better arrangement by borrowing directly from a friend or family member, this may be a better solution to take. If it’s a friend, be sure you can fully trust them and make sure it is a genuine friend and not a “sort of friend of a friend” who actually turns out to be a loan shark.

With our guarantor loans, you can be sure you are borrowing directly from a reputable, fully licenced UK company who all rules and legislation outlined in your loan agreement.

Why are The Interest Rates So High?

This is an interesting point, because in our opinion, they’re not. It is obviously true that there are loans available with lower rates, however these loans are only available to those who have the best credit records and who also adhere to strict loan criteria, for example; at the very least being in a secure job and accommodation for x number of years. Our guarantor loans are designed to be accessible for people who don’t find themselves in these absolutely perfect conditions, so therefore the rates have to be higher to compensate for the loans which for one reason or another aren’t repaid.

You might argue that this isn’t fair on those who do repay the loans; this is absolutely true, however, without setting rates at this level, the products simply wouldn’t exist as they wouldn’t be a viable product to maintain.

It is also rather dependant on your current situation. For example, for someone who is currently struggling to repay several payday loans at 5000% APR, consolidating them with a guarantor loan at 53.8% is a far cheaper option and could turn an individuals life around. If you are struggling with your debt you may want to seek professional advice on your situation before proceeding with any sort of finance.

But Aren’t You Just Lending to The Guarantor?

The guarantor acts as a safeguard in case the applicant fails to meet repayments, so although the guarantor provides extra security, the default rates on this type of loan are still higher than a loan provided by prime lenders such as Sainsbury’s or Barclays for example. Thus resulting in the higher interest rates.

The loan is an agreement between the guarantor lender and the applicant, with the guarantor acting as a surety. This means that the money is an arrangement with the applicant, not the guarantor. However, if the applicant fails to keep up with repayments, the guarantor can be pursued to make loan repayments on his/her behalf.

Is the Loan Secured on The Guarantor’s Property

No, the loans are not secured loans, they are unsecured loans, the same as a standard personal loan agreement.

As with all unsecured loans it is technically possible for a lender to put a charging order on a property if a loan remains unpaid. This means that upon sale of the property, the debt can be taken from any money made from it. It’s much more difficult for a creditor to repossess a home if an unsecured loan is defaulted on, opposed to a secured loan, and is generally not an enforced practice. However it is possible.

Extra Benefits of a Guarantor Loan

Additional benefits include that fact that paying back a guarantor loan can actually help to improve your credit history and set you up for cheaper, future borrowing options;

If you continue to pay back your loan in line with the terms of your agreement (e.g. pay £x back each month without missing payments) then this could boost the standing of your credit record and show future lenders that you took out a loan and managed it well. Because the agreement is with the applicant, this is usually reported back to the applicant’s record and therefore helps the applicant.

If you were to borrow from family or friends, this wouldn’t help your credit rating.

Is a Guarantor Loan the Right Option for Me?

This entirely depends on your personal situation. Our loans are designed to be more accessible than other fixed term unsecured loans and could help you if you’re looking for a loan which;

  • Has fixed monthly repayments over a term of up to 5 years
  • Has an interest rate lower than many other loan products, allowing you to potentially consolidate more expensive credit
  • Is accessible to those with poor credit backgrounds

You should weigh up your situation against any other possible alternatives. If you can find a cheaper, legal (i.e. licenced & regulated) and more ideal solution then you may want to go with the alternative option, if not then a guarantor loan may be an option you wish to consider. If you need help with your finances, please seek professional financial advice before proceeding with any financial product.


Viewing all articles
Browse latest Browse all 12

Latest Images

Trending Articles





Latest Images