Is a Loan With Guarantor a Good Option?
If you need a loan, but your credit rating is poor, then taking out an unsecured loan with a guarantor could be an option. A guarantor is someone who will repay the debt for you if you, as the borrower, defaults on the agreed amount.
A lot of companies offer guarantor loans as an option for those who are in the sub-prime category - those who have a poor credit score, and those who do not have any credit history at all. If you have missed payments in the past and are considered to be a credit risk, then a guarantor loan could be an option for you.
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A lot of companies offer guarantor loans as an option for those who are in the sub-prime category - those who have a poor credit score, and those who do not have any credit history at all. If you have missed payments in the past and are considered to be a credit risk, then a guarantor loan could be an option for you.
To find out what is the best way to find cheap guarantor loans, return to my homepage now!
Maximising Your Chances of Acceptance
Applications for a loan with guarantor often a higher chance of being accepted than loan applications from people with a poor credit score who do not have someone who is willing to act as a guarantor for them - assuming, of course, that the guarantor has a good credit rating themselves.
The APR on a guarantor loan is usually higher than the APR on a normal loan, but it tends to be more reasonable than the amount that is charged for a payday loan or a cash advance. Mainstream lenders don't usually use the guarantor system, but there are a lot of sub-prime companies that encourage people to use it. Guarantors are usually family members, but close friends may sometimes step up to help people out as well. For another example of how a loan guarantor may work, please check out the following video: |
Different Sorts of Pressure
There are social pressures associated with borrowing under the guarantor system. For example, someone might feel that if they fail to repay, it's not just a bank that they are hurting, but actually a person that they care about. This, plus the fact that the other person has a credit rating that they need to take care of, is what helps to ensure that the borrower does indeed stick to the repayments.
In addition, because you have to admit to someone that you have been having money problems, and ask them to pay the loan back for you, this creates a situation where the borrower is forced to think carefully about whether they really need the money; they can't just apply for credit to spend on frivolous things, because they will need to have a frank conversation with their guarantor about why they need the money and why their credit rating is so poor - which most people will be reluctant to do without good reason.
In addition, because you have to admit to someone that you have been having money problems, and ask them to pay the loan back for you, this creates a situation where the borrower is forced to think carefully about whether they really need the money; they can't just apply for credit to spend on frivolous things, because they will need to have a frank conversation with their guarantor about why they need the money and why their credit rating is so poor - which most people will be reluctant to do without good reason.