subject: Guarantor Loans Rescue Payday Borrowers [print this page] Payday loans are an American phenomenon that have been growing fast in the UK market over the last five years. The premise is that they offer a relatively small amount of cash (usually up to 500) for a short term, around 2 weeks (or until 'payday'). The providers charge a fee for the loan usually expressed as a flat fee per 100 borrowed - usually around 25.These loans undoubtedly have their place for consumers wanting to meet an urgent outlay with relatively little fuss and few, if any, forms to complete. However, the problem comes when the customer starts to rely on them as an easy source of money rather than spending time looking for a product that more closely matches their needs. It is not uncommon for customers to 'roll' their initial loans on to subsequent months, thus incurring more charges, or to take multiple loans to build up to the amount they really need. When the flat fees are expressed as an APR the numbers can look horrific with figures often well over 1,000%.It is easy to see how this happens in today's market given the aversion of the High Street banks to provide unsecured finance to anybody without a spotless credit history. This is compounded by the fact that many of the 'sub-prime' lenders who used to fill the void behind the high street lenders have all but disappeared.However in their place is a new product, Guarantor Loans. The providers of these loans know their market well and have created a product that is accessible to consumers who do not have unblemished credit histories. They work by asking the applicant to provide a Homeowner who will back the application and 'step in' should the applicant default. The lender is therefore able to reduce the risk, which allows them to lend to this market.As the lenders can accept applicants with previous poor credit, the Guarantor Loans offer an alternative to racking up multiple payday loans and at a much more attractive rate. The awareness of Guarantor Loans is growing but a little effort to find the right product could reap rewards for the diligent borrower.
by: Jon Miller
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