Article by John Ratzki
Guarantor loans are the latest development in the world of personal loans. It is a new type of lending that that is innovative and fresh and I am sure that more lenders will emerge in the near future. We all make mistakes, but if you are serious about being responsible about your finances and finally taking charge, then perhaps getting a second chance with a guarantor loan may just be right up your street.
A guarantor loan is also known as an unsecured loan and it shows an agreement between the loan provider, the borrower, and the guarantor. There is no action to be taken at all until there is a breach of loan agreement by the borrower. In this case the guarantor becomes accountable for the loan and must pay off it or risk sacrificing their home, even though this type of loan is unsecured.
The loan is genuinely among the last choices for those people who have been refused loans through the normal traditional channels such as banks and building societies and other lenders and private investors.
Although it is may seem daunting to ask someone to stand in as your guarantor, all that you are asking for is an endorsement of your loan application and the chance to prove yourself. Once you have been paying your loan for a few months, your credit rating will improve and the guarantor will never even have to hear from the lender again. Another benefit is that you will never have to pay any upfront fees (as long as you choose a no-upfront fee broker)
Today, guarantor loans are often the first choice for people with bad credit looking for unsecured loans. While it is not easy to find a guarantor, it is a lot more viable (not to mention cheaper) than the alternatives, particularly the payday firms who often charge APRs that can be as high as 2500%!. So they are cheaper, they allow people to help their brother, sister, mother or father, friend or neighbour and most importantly, give people access to finance that they otherwise would not have a chance of getting.
By applying for a guarantor loan online, you are making an application for a type of loan known as an unsecured loan. A guarantor loan is just another version of a this type of loan. An unsecured loan means that the lender will not have an asset to stake as security against the loan that they offer you. This means that if you (the borrower) do not repay the loan for any reason, then they will have difficulty trying to get the money back off you because you have no assets secured against your borrowing. This means that there is no house or car to repossess in lieu of the debt because you never put these forward against the loan (assuming you had one of course)
In summary, guarantor loans are quite simply the process of allowing someone to endorse your loan application to the lender. It has to be someone who is working and it has to be someone who has a fairly good credit history, because the whole point of a loan guarantor is that they are the ones that the lender will be basing their lending decision on, not the borrower. And finally, think of a guarantor loan as a form of credit repair because the lender will place the borrower on the credit report, not the guarantor, and as long as the borrower maintains a good, regular payment record, then other finance and credit companies will see this and note that you bow have a responsible attitude to borrowing money.