What is a guarantor loan?
Guarantor loans are loans that involve someone else taking responsibility for your loan repayments if you cannot. This person is legally responsible for the loan and therefore must make repayments if you fail to do so. Therefore, a guarantor must first be someone you are close to and trust, such as a family member or friend. Typically, money lenders require a guarantor to be aged between 18 – 70 and to be financially secure enough to cover your repayments. Some direct lenders will require that the guarantor is a homeowner, but this isn’t always the case.
If you are looking for loans with a guarantor, you must consider the financial standing of your guarantor. This is because lenders will place just as much importance on the financial stability of your guarantor as they will you. So as to maximise your chances of being approved, you must choose your guarantor wisely. Having a guarantor gives extra security to the lender, and as such, they may be able to offer you lower interest rates than some other bad credit loan providers.
Guarantor loan questions:
Q1 – Who should guarantor my loan?
Q2 – What are the different types of guarantor loans on offer?
Q3 – Am I guaranteed to be accepted for a loan if I have a guarantor?
Q4 – Why should I choose a guarantor loan?
Q5 – When the loan is paid out is it sent to me or the guarantor?
Q6 – What happens if I miss a payment?
Your guarantor must be able to make the repayments should you fail to. This is because they will be held financially responsible for your guarantor loan, and this may have an adverse effect on their own financial stability. Whilst family members are an obvious choice, this is not always possible or desirable. Therefore, direct lenders do not restrict guarantors to only being family members – ensuring everyone has an equal opportunity to apply for such a loan. Lastly, you cannot choose anyone whom you already share financial responsibilities with. For example, a partner whom you share a joint bank account or mortgage with will not be accepted. The person acting as a guarantor is risking their credit score if you do not make the repayments.
Understanding that people need to borrow money for a variety of reasons, and at different times in their lives, guarantor lenders take various criteria into account when considering an application. If you have a CCJ or default, a guarantor loan may still be an option as lenders will assess your ability to repay the loan. The creditworthiness of your guarantor is also taken into account, so as long as they have a good credit history and you can show you can afford the repayments, you should be fine even if you have bad credit.
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If you are a young borrower or have never taken out credit before, it is possible that some lenders will turn you down for credit. This is due to you not having built up a credit score yet. Guarantor loans can help with this as it enables a young person to gradually build up a credit score while being assisted by a guarantor.
If your loan remains in arrears the company will attempt to take a payment from the guarantor as per the terms of your loan agreement.
What do I need to get a Loan with Upwards?
- Over 18 Years of Age
- Income over £400 Per month
- Have a Bank Account with Debit Card
- Be a UK Resident
- All Credit Scores Considered