What is a guarantor loan?
guarantor loans explainedIf your struggling to get credit and lenders are reluctant to lend to you, it is probably down to a poor credit score. Guarantor loans do away with your credit history and don’t work off your credit score, they work off your guarantors credit history. A guarantor is someone you know that is willing to guarantee your loan should you get into financial difficulty and be unable to make the repayments on the loan. This gives guarantor loan lenders the confidence to lend you the money you want, the fact that there is someone ready to take over your payments goes a long way in the credit market.
But just because there is someone ready to step in to take over payments, doesn’t mean you will automatically get the loan amount you need, you need to be able to afford the repayments on the loan amount you want, which is usually worked out from your disposable income and current credit agreements, by a real person – not a computer! The guarantor also needs enough disposable income to cover the payments should the worse happen and you be unable to make payments.
So who can be your guarantor? Anyone who knows you well enough, and has a good credit record is the simple answer. It can be a family member, work colleague, friend or even your boss. They need to have a good credit record and as mentioned earlier have enough disposable income. They can be a homeowner or a tenant, but there are restrictions on using a tenant as a guarantor. If using a tenant as your guarantor then the maximum amount you will be able to lend is £3000, and the interest rate APR will be 99.9% instead of the rate of around 48% apr of when using a homeowner, so finding a homeowner as a guarantor will result in lower monthly payments than using a tenant.
We can arrange guarantor loans of up to £10,000, again there are restrictions on the higher amounts, if you are a tenant the maximum you will be able to lend is £6000, for £6001 – £10,000 you will also need to be a homeowner as well as your guarantor. if you really need the £10,000 and you are a tenant and can easily afford the repayments, then we do have an option of splitting the full amount over 2 lenders, you can email about this for more details before applying should you want more information.
Can you afford the loan? You should really have a debt to income ratio lower than 55% to be considered for a guarantor loan, if you want to work out your debt to income ratio take a look at this handy calculator here.
If you have any other questions not covered here take a look at our FAQ section or drop us an email.
If you think you have a guarantor who meets the criteria and you think you can afford the repayments then apply now for a quote.
Representative example: Borrowing £3000 over 36 months with a fixed APR of 48.6%. Monthly Repayment of £144.94. Overall the total to pay back is £5217.84