If you have a poor credit history, or perhaps no credit history at all, it can be very difficult to access loans that require credit checks. An alternative to this is a guarantor loan. Guarantor loans enable people who are otherwise struggling to borrow money to access loans by naming a guarantor as security. These types of loans have been around for many years and in fact were the predecessor of bank loans as we understand them now. Prior to credit scoring, trust based guarantor loans were the norm. Since the recession, guarantor loans have made a comeback as a common form of borrowing money.
The difference between secured loans and unsecured loans
There are two types of guarantor loans. The first type is a secured loan. A secured loan means that the guarantor is a homeowner who is able list items of property that would be repossessed in the event of the borrower defaulting on the loan. Homeowners are deemed to be more reliable as they have a fixed address and are considered more financially stable. The maximum borrowing amount for secured guarantor loans is £15,000.
An unsecured loan is also known as a tenant guarantor loan as the guarantor is not a homeowner, and therefore the loan cannot be secured against a property. Unsecured guarantors must prove their financial stability however by undergoing credit checks and showing evidence of a steady source of income. Most lenders, such as Guarantor Loans 20000 are willing to consider guarantors loans for non homeowners.
If a guarantor is unable to pass the relevant credit checks or has missed payments, defaults or CCJs in their credit history than lenders will not accept them as security for a loan.
Becoming a Guarantor
Guarantors can be friends, family members or coworkers and in fact anybody over 21 who passes the relevant credit checks, as long as they do not have financial links to the borrower. However if you intend to become a guarantor you need to be aware of the risk you are taking. If a borrower defaults on a loan than as guarantor you will shoulder the burden of the loan and interest. If the money cannot be paid then both you and the borrower could end up in court. This will then affect your future credit ratings. Before agreeing to be a guarantor you should feel confident that the borrower will be able to make the repayments. You also need to be confident that you could take responsibility for the amount of the loan if necessary. However, as long as the debts are paid on time than acting as a guarantor will have no negative effect on your credit report.
Can you get a guarantor loan instant payout?
Some companies will offer instant guarantor loans. It is usually quicker to deal with a guarantor loans direct lender. This means that you bypass any third parties which may delay the process. Direct lenders may be able to transfer funds directly into your account and offer a closer client/lender relationship which is an important aspect of trust based lending. With the right documentation you can apply online and receive your money on the same day.