A bad credit guarantor loan is an unsecured loan that requires a friend or family member to guarantee the repayments, even if you have a poor credit history.
If you’ve found yourself here, chances are you probably have bad credit and are looking for a way to obtain a loan. Well, fear not, even with bad credit you can get access to the funds you need. Get yourself a guarantor (a family member or friend) and find out everything you need to know about Bad Credit Guarantor Loans.
In essence, it’s a loan for people who have a bad credit score or a minimal credit history who can find a guarantor to secure the loan for them. The guarantor will be responsible for the loan if the borrower fails to keep up with payments. Initially, the money is deposited into the bank of the guarantor and then transferred to the borrower.
Lenders are now more open to offering this type of loan to allow people with a bad credit rating to obtain the loan they need. With the added security of a guarantor, it means that it’s a less of a risky prospect for the lender.
The biggest benefit of this loan is that you can have access to money that you might not be able to get in normal circumstances. It also gives people with a bad credit score the chance to show that they can responsibly borrow money and therefore be helping towards making their credit score better. And in the long run, making it easier for them to get a loan in the future.
With any loan, you’re going to have to factor in interest rates. With a bad credit loan, you’ll often find that you have to pay a much higher rate of interest because of the risk to the lender. However, having a guarantor means you might not pay as much as you would if you were applying alone. Bad credit guarantor loans don’t have a cap on the interest that you’ll pay, so this is always something to carefully consider when looking to apply for one.
Anyone who is 18 years old or above and has a UK bank account can apply for the loan. When acting as someone’s guarantor, you have to be 21 years old or above and possess a good credit history. Usually they will also have to be a homeowner, however, there are some bad credit loans where this isn’t essential. If the guarantor is a homeowner, it may mean that you are eligible to borrow a larger sum of money. Also, the guarantor must not be financially linked to you, so you can’t currently share a bank account.
If you’re the borrower, you’ve always got to consider the guarantor when applying for this type of loan. If you default on your repayments, the guarantor will be responsible for coughing up the money. If they are a homeowner, the loan could be held against their property and in the most serious cases, could be repossessed. Always exhaust every other option before opting for a bad credit guarantor loan. Plus make sure that the relationship between you and the guarantor isn’t fragile. Money problems between family and friends can put a real strain on the relationship.
Detail all of your financial commitments, what money you have coming in and how much you will need to borrow. By setting yourself up with a structured plan, it will not only help you be disciplined with your finances but will also show the guarantor that you’re serious about your commitments. It’s also common for the borrower and guarantor to set up their own contract to ensure security for both parties. This can ease any tension between the agreement and make the process as stress-free as possible. Next, start your research of lenders. You want a reputable lender who’s regulated by the Financial Conduct Authority. This is easily checked by searching on the financial services register. Then, all you need to do is go ahead and apply.
If you are having financial difficulties or need to speak to someone regarding your financial situation before applying for a loan you can get free and confidential advice from MoneyHelper (formerly The Money Advice Service), National Debtline or debt charity StepChange.
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Representative 49.9% APR
Representative example: Amount of credit: £1200 for 18 months at £90.46 per month. Total amount repayable of £1628.28 Interest: £428.28. Interest rate: 49.9% pa (variable). 49.9% APR Representative. Rates from 45.3% APR to 1721% APR - your no-obligation quote and APR will be based on your personal circumstances. The minimum repayment period for any loan will be 90 days from the date the loan is issued. The maximum repayment period is 3 years.
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