subject: Guarantor Loans And The Alternatives [print this page] As the UK emerges from the recession, more and more consumers are finding themselves strapped for cash, and in need of finance. However, some have found the recent financial events tougher than others, and this has had an effect on their ability to obtain credit. There are several options that are now available to the type of customer that may be turned away by the average high street bank.
Payday loans are usually seen as a short term solution, with agreements often only lasting days, weeks or months. The loans offered on this basis are always small amounts, with the emphasis being on fast cash. Whilst the thought of receiving funds quickly may be alluring, payday loans come with very high amounts of interest, with the debtor potentially being charged upwards of 1000% APR.
Not dissimilar to payday loans, doorstop loans also offer small amounts, borrowed over a short period. These are also charged at a high APR, and offer little or no incentive for early repayment. Doorstop loans are paid weekly when a local agent calls at the door.
Lenders that are not licensed by the Office of Fair Trading, and therefore operate outside of the law, are known as loan sharks. These are predatory lenders, who usually target people that cannot obtain finance elsewhere. These loans are offered at high, or even undetermined interest rates, and are often taken up by those desperate for cash. Debtors are harassed for late repayments, and could be subjected to intimidation, or even violence.
Guarantor loans provide a safer route to the finance. As the lenders can offer longer repayments terms and larger amounts, the rates of interest are not as high, and the pressure to come up with the cash fast is not as high. The basic concept of a guarantor loan is that the debtor applies for the finance, and adds a guarantor on to the application to effectively guarantee the repayment of the loan. This gives the lender peace of mind, meaning guarantor loan lenders may be more accommodating to those that may be refused credit elsewhere.
by: Jon Miller
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