What are Guarantor Loans?
These unsecured Loans tend to be taken out between 1 to 7 years and generally, you can borrow between £1,500 to £25,000, sometimes higher. When applying for a guarantor loan you are required you to have a second person acting as a guarantor.
Guarantor loans are not new though, this is how banks/building societies used to lend before any computer credit scoring came into play, even now it is still common place for landlords and mortgage companies to ask you for a guarantor.
Almost anyone can act as your guarantor for your loan, as long as they are not financially linked to you (i.e. a spouse). A guarantor could be a brother, sister, mother, father or any other family member, a friend or even a work colleague.
For your guarantor to be accepted they will usually need to be between 21 and 75 (some lenders may have a different age range) with a good credit history and also be a UK home owner (even though guarantor loans are not secured loans).
Checks on your guarantor are pretty much the same as normal credit checks – they will need to provide bank statements and proof of ID.
Interest on a guarantor loan varies from lender to lender and financial circumstances but usually between 39% – 60% as a guide
Be careful when offering yourself up as a guarantor, this is a legally binding contract that makes the guarantor accountable for the loan should it not be re-payed back on-time or at all, however, both the guarantor and the applicant can be taken to court if the loan is not paid back.
Improve my Credit Score
Although you have a guarantor loan, with a friend, family member or colleague acting as your guarantor, if you pay back the loan on-time and in full this will help your credit score as it will be shown on your credit report/file