What are Bad Credit Guarantor Loans?
If you’ve ever been in a position where you needed to borrow money quickly, then you’ll know first-hand just how detrimental bad credit can really be.
No matter what kind of loan you’re applying for, the lender will look at your credit to determine how much of a risk you pose to them and their future success. The worse your credit rating is, the less likely you are to get a good deal on your loan. Eventually, the situation can get so bad that you may not be approved for your loans at all.
Fortunately, there are solutions available.
Poor credit ratings are pretty common in the UK, particularly as the cost of living becomes more expensive, and the money we earn in our jobs rarely hits the mark. What’s more, while it can take years to build up a good credit score, all it takes is one mistake to bring your credit rating tumbling down. That’s why loan providers created bad credit loans.
How much would you like to borrow?
Representative Example: Rates from 49.9% APR to max 1333% APR. Minimum Loan Length is 1 month. Maximum Loan Length is 36 months. Representative Example: £250 borrowed for 30 days. Total amount repayable is £310.00. Interest charged is £60.00, annual interest rate of 292% (fixed). Representative 669.35% APR (variable).
What are Bad Credit Loans?
Before you can understand bad credit guarantor loans, you first need an insight into the basics of bad credit loans and how they work for people with a poor credit history.
As you probably know, there are a number of things that can end up pushing a person into a difficult financial situation where their credit begins to suffer. Poor financial management, bad income, and unplanned costs are just some of the things that can make life difficult. Bad credit loans are tools designed to help people with a poor credit history as they strive to get into a better financial position and boost their credit scores.
While some people end up struggling to get credit because they’ve never borrowed cash before, and therefore have no credit history to show their lenders, other people just have bad credit caused by a failure to pay off debts on time.
The whole purpose of bad credit loans is to allow people with a less than perfect credit history to get a second chance when they need to borrow money for an emergency situation. Most bad credit loans can even offer support to people who would be completely ignored by a traditional or mainstream lender.
What are Bad Credit Loans with a Guarantor?
Just like most loan products, bad credit loans come in a variety of different shapes and sizes, from short-term payday loans, to longer-term guarantor loans.
If you need to borrow money as part of a secured loan to keep your interest rates low, then a little loan with no credit check could be the perfect option. With guarantor loans, you don’t have to worry about having the best credit rating or property that you can put up as security on your lending. Instead, you get a friend or family member to guarantee that they will honour the debt you owe on your behalf if you fail to pay the money that you owe.
You’ll need a pretty good relationship with the guarantor that you choose if you want them to take on this level of risk for you. However, the good news for guarantors is that lenders still conduct affordability checks when a guarantor is available. Even if you have someone else to pay your loan if you default on it, your credit provider will want to make sure that you can afford your new lending package.
Guarantor loans help people with poor credit to get the money they need by reducing the amount of risk that they pose to today’s lenders. Because your lender knows that they’re going to get the money that they’re owed from someone, no matter what happens, they’re more likely to give you the cash you want. However, this will only apply if your guarantor has a good credit score.
How Do Bad Credit Guarantor Loans Work?
So, how do guarantor loans for people with bad credit work?
Basically, these loans are often recommended as options for people who might have been rejected from their application for a conventional loan. By asking someone else to act as your guarantor, you can improve your chances of being approved by a range of lenders.
Importantly, in a guarantor loan, guarantors are only called upon to pay the money owed as a last resort. This means that your guarantor can forget all about guaranteeing your lending until you default on your loan and the loan provider has no-one else to turn to.
Often, lenders advise guarantors to think carefully about stepping in on behalf of a friend and family member who has trouble getting credit. If you don’t trust someone to make all the payments required to pay off their loan, then it’s probably not a good idea to be a guarantor for them.
On the other hand, guarantor loans can be an excellent option for people who just need a second chance to get their finances and even their credit back on track.
When Are Guarantor Loans a Good Idea?
If you have a poor credit score, then a guarantor loan is one of the best ways to begin building that score up again. That’s because when you make your payments on time, you show the credit bureaus that you’ve learned from your mistakes with money, and you can be responsible with cash. If you can’t get a loan elsewhere, then a guarantor loan could be your only chance to change the perception that the credit bureaus have of you.
Improving your credit score with a guarantor loan might mean spending a little more on interest at first, but it also means that you’ll be far more likely to be approved for conventional lending options in the future, often with better deals attached to them. Of course, credit scores can only be improved when you stick to the payment plan provided by your loan company.
Loans for people with bad credit that offer options like guarantor lending can also be helpful for consolidating existing debt or making essential purchases. If you need to deal with a sudden emergency expense and you can’t find anywhere else that you can borrow money from, these loans can act as an essential lifeline in times of trouble.
Can Anyone Be A Guarantor?
The rules and conditions around guarantor loans and student payday loans will differ depending on where you apply for your money. However, most of the time, a guarantor can be just about anyone who trust you to repay the money that you owe on time. Usually, this person is a friend, a parent or a family member. However, it shouldn’t be someone who is connected to you financially, like a spouse.
Your guarantor will also need to be a homeowner and resident of the UK and aged between the years of 18 and 75 with a regular source of income. Usually, your lender will need to conduct a credit check on your chosen guarantor to determine whether or not they can afford to step in if you don’t pay back the money that you owe.
The guarantor that you choose for your bad credit loan would need to speak to your lender and go through the process of applying for a loan for the most part themselves. This includes having an affordability assessment conducted. Guarantors also need to sign documents that outline the nature of their relationship with the person getting the loan, and what they need to do if you don’t pay the loan.
In some cases, a bad credit loan that includes a guarantor will be paid directly into the bank account of the guarantor, rather than the person that actually needs the money.
Are There Alternatives to Guarantor Loans?
If you can’t find anyone who’s willing to step in and promise to pay off your loan if you can’t afford to make your repayments, then there are alternatives available. For instance, you can get bad credit loans that don’t require a guarantor. Payday loans and short-term loans are excellent for people who don’t have the best credit ratings. These smaller loans allow you to pay off the money that you borrow quickly, so you don’t have to worry about posing too much of a risk to your lender.
Of course, the bet thing you can do if you’re worried about your options for loans when you have bad credit, is look for ways to improve your credit. No matter what you do in your life, your credit rating will always have an impact on your ability to access financial help. Looking for ways to improve your credit, like signing up for the electoral roll, or consolidating your debt will help you to improve your credit rating over time. You can also check with the credit bureaus to make sure that the information they have about you is correct.
Bad credit can make it difficult to get the money you need when you’re in a financial emergency, but with Boutell and bad credit loans, you can get yourself back on track.