Are Guarantor Loans The Future?
After the onset of the credit crunch, obtaining credit or finance has become a whole lot harder
. Banks have changed their lending criteria and have made the thresholds for borrowing money a lot more stringent.As a result of this, if you have had some difficulties keeping up-to-date with any loan repayments you may have some bad credit on your credit file, however, all is not lost and there are still options available to people with bad credit or a low credit score.A
Guarantor Loan is a new way of enabling people with bad credit or other circumstances preventing them from obtaining mainstream credit the ability to get a loan by having someone who will act as their guarantor.A guarantor is an individual that would know the person who is trying to obtain credit and would be prepared to guarantee the repayments of the loan. A guarantor could be a relative or friend or even a colleague, this person would usually have a good credit rating. The loan would still be in the name of the applicant and could be a great way to start the process of repairing their own credit file.A guarantor loan is a form of unsecured credit, so failing to meet the required payments each month means that the guarantor will not lose their property or valuables because the loan is had not been secured against it. It is important to know that when you are guaranteeing a loan that the unsecured debt could at some point be turned into a secured debt if the lender decides to take formal action and go to court. This would be a last option if no other agreement could be made.There is a misconception that guarantor loans are a lot more expensive than regular unsecured loans, this is not the case as rates can be comparable, but not as comparable as some secured loan rates. Points for thought The world of financial services has changed forever, obtaining credit in these challenging times can be difficult for even people with clean credit files. A guarantor loan could be the way lending returns to the UK market, and through the use of trusted relationships between guarantors and their applicant.
by: Jon Miller
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