- Emma Parker
- June 1, 2023
A guarantor can make your loan easier. To some extent, you might also get to make that loan more affordable. Most guarantor loans are pretty effective when you want to learn about loans. However, you might have other perks to it too.
Guarantor loans often come into the picture for larger purchases. You are likely to look for a guarantor when you are taking out a larger loan, such as a mortgage. Again, you might want to look at a guarantor loan when there’s a long-term funding need. Maybe, someone like you is looking for a guarantor loan to improve your credit score. Is it possible, though? We can try finding it out in this post.
What Are Guarantor Loans?
Guarantor loans are easy to understand. We might say that a guarantor loan comes into existence when a borrower is not flexible or confident enough to make the repayment. A guarantor works as a person or a party who offers security for the loan to the lender. When you bring a guarantor with you to borrow money, your lender will take note of you two and will reach the guarantor in case you (the borrower) fail to make repayment.
- Because of the fact that your guarantor co-signs the loan with you, he/ she/ the party is also called a co-signer. However, there are some facts we are missing out on a guarantor loan.
- A guarantor loan is an unsecured loan. It does not mandate the presence of collateral. You can take this loan out without any assets included.
- Your guarantor co-signs the loan with you in order to provide security to the lenders. The repayment of the loan is completely your responsibility. If you fail to make repayments, and that too for a significant reason, only then lenders will reach your guarantor to get the repayment.
- Financial details from the borrower and the guarantor come into the picture for this loan. Both your credit scores and income statement will be reviewed by lenders before offering approval.
- A guarantor might sound like a person. Of course, that’s true. But it is also true that you can choose a group of people or an institution to be your guarantor. In many cases, one’s employer has also been found to serve as a guarantor for a loan.
What Reasons Make One Choose a Guarantor Loan?
There are many benefits to choosing a guarantor loan. Apart from that, there are certain reasons to avoid other loans and go for it too. Here they are:
- You can choose a guarantor loan if you are a new and young professional. In phases like this, you don’t usually have enough resources to repay your loan quickly. Therefore, your loan instalments are strictly dependent on your income. A guarantor may help you with this factor and keep you mentally relaxed.
- You can go for a guarantor loan if you are an experienced professional but you are unemployed or you have a low salary at the moment. A guarantor can help you get low-interest rates, which might help you make your repayments more conveniently.
- What if you have no credit history? What if you are in the borrowing zone where you are looking for loan products like monthly instalment loans with no credit check? Direct lenders in the UK will recommend you go for a guarantor loan.
- Guarantor loans are also taken out if the borrower wants to take out a secured loan. As mentioned earlier, one may think of a guarantor to make loans like car loans or mortgages easier at interest and other rates.
- Again, you can take a guarantor loan out when you have a low credit score. In this credit rating, borrowing can become difficult and lengthy. However, a guarantor coming into the picture can make it easier and fast. You can, in fact, take out larger loans such as unsecured business loans for bad credit from a direct lender if only you can bring a guarantor to sign the loan terms. You may also ask your business partner to be your guarantor.
Although guarantor loans are offered for a bad credit score, the question popping up in your head is whether or not it can help you elevate your credit score, right? In that case, the next point might help you better.
Does a Guarantor Loan Make Sense When I Want to Improve My Credit Score?
The plain answer to that question is a ‘yes’. However, you need to understand how your credit score works.
If you make untimely payments; or insufficient payments using your credit card, then your credit score gets low. It shows poor financial management from your end. At the same time, making more payments than the credit limit or not paying the Annual Fees can drag your credit score lower. However, we will stick to the late and insufficient payments to understand how a guarantor loan can help you out.
When you take out a guarantor loan with bad credit, you can use the loan to pay off the credit card debts you have. At the same time, you may use the same loan to pay off the penalty charges. It improves your credit score.
Now comes the repayment of the loan. Since you have taken it out and it bears significant information in your credit rating, you can use it to improve your score even further. It’s easy to do so. Just pay your lenders the loan back at the right time. It can help to escalate your credit score.
Now that you know how a guarantor loan might help you make a great change to your borrowing needs, then you might be looking for one right now. We can help you out in this regard. We are one of the direct lenders in the nation, and we have exceptional guarantor loan options to keep the deal simple and fast.
Guarantor loans are loans that have been around for days. They do come with perks that people taking out unsecured loans miss out on. Any type of loan has its own set of perks, though. Find out if a guarantor loan suits your purpose. We can help you in taking it out.
Emma Parker is a financial counsellor at LondonLoansBank and has been serving for over 5 years. She is a psychology graduate from the University of Glasgow. Since she has keen interest in the finance field, she pursued a diploma course in banking and finance that led her to opt for her current career. She assists people choose the best loan based on their current financial situation and credit score. As Emma understands how people react to money problems, she gives them a helping hand to solve their financial complications.