subject: Why a Guarantor Loan? [print this page] If you've applied for a loan in today's financial market you will know better than anybody how much the market has changed following the Credit Crunch and Recession and you will also know that having a guarantor for your loan could help. However, your Guarantor may not appreciate the effects the Recession has had.
Below are a few facts that may help a guarantor better understand the current market and therefore be more inclined to help.
Why do you need a Guarantor for loans these days? You never used to need one to get a loan.
In today's market, having a Guarantor greatly increases the number of loan products that you can access.
According to Moneyfacts* the number of lenders offering unsecured loans has fallen by nearly 40% from 2007 to 2009. Those that remain have withdrawn or changed many of the products that they used to offer. In short, the choice for unsecured loan products is greatly reduced.
Why can't the applicant just go to their bank?
It's true that the High Street Banks do still have unsecured loan products but the fact is they're just not lending anywhere near enough money to help everybody.
According to The Bank of England, the high street lenders have reduced their net levels of unsecured lending by 90% since 2008.
High street lenders for the Bank of England report means: Barclays, HSBC, Lloyds Banking Group, Nationwide, Santander and Royal Bank of Scotland.
I have seen rates of around 12%, why are guarantor loan rates higher?
As the banks are lending much less, the very best rates are only accessible by those with spotless credit histories and are often only available to the bank's own customers.
It is estimated that up to 1 in 4 adults in the UK have had some form of adverse credit - which could be just be an odd missed payment.
Some non-high street lenders charge upwards of 80% APR, whilst payday-type loans can have APRs of over 1,000%.
By asking for a Guarantor who knows an applicant, a guarantor loan company can help them obtain the loan they need at a much more competitive rate.
Source
* Moneyfacts "Lenders move away from unsecured lending" (July 2009)
** Bank of England "trends in lending" (June 2009)
Why a Guarantor Loan?
By: Jon Miller
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