What are Guarantor Loans?
Guarantor Loan are unsecured loans, that can to be taken out between 1 to 7 years and generally. At Simple Personal Loans, you can borrow between £1,000 to £35,000, 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 and building societies used to lend before any computer credit scoring came into play. Even now it is still commonplace 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. They will need a good credit history and also be a UK homeowner. Even though these are unsecured 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.
Do be careful when offering yourself up as a guarantor. As 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.
Guarantor or no guarantor – what’s the difference?
When you apply for a loan with no guarantor the lender will run a credit check on you before deciding whether to approve your application. You are solely responsible for repaying the loan. But guarantor loans work a little differently.
In this case, you ask someone you know to guarantee the loan for you. This means they agree to make any payments should you be unable to do so. If your guarantor has a good credit rating the lender is likely to approve the loan. Even if you have a bad credit history.
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 or file.