There are many different types of loans available and they all tend to suit different purposes. It is therefore important to have a good understanding of what loans there are available and which ones will suit you and your needs. Some loans are more well-known than others and it could be the case that you already know how a mortgage works, but you may be less clear on a guarantor loan. This is because it is not normally offered by the more well-known lenders and is also relatively new compared to mortgages. It is good to get to know a bit more about what it is and how it works and then you will be able to decide whether it is right for you.
What is a Guarantor Loan?
A guarantor loan is a specific type of loan which will allow people to borrow several thousand pounds, probably up to ten thousand pounds, depending on the specific lender. They require the person applying to also have a guarantor who will make the loan repayments if the borrower cannot do so. The loans tend to be available from specialist lenders and there are no rules as to what the loans have to be used for.
Who are they for?
The idea of a guarantor loan is that someone that has a poor credit record will be able to borrow the money so that they can get a significant and therefore help with a large purchase. However, as they normally cannot borrow this much money, they have a guarantor who will cover the repayment’s if they cannot. It means the lender can build up some trust that their loan will be repaid. Normally someone that has a good credit record would be able to use a conventional loan, but it is wise to know about these anyway as you should be able to decide whether you think that it will be the right sort of loan for you in a specific circumstance. For example, it might happen that a guarantor loan is cheaper or it might be the case that you suddenly lose your job or something like that and get a poor credit record and therefore need to look for this sort of loan.
Are They Right for me?
Before you decide if this sort of loan is right for you it is always important to think about whether any sort of loan is right for you. Consider what you are using the loan for and whether you can justify the cost. Then compare the different types of loans and their costs to see which will be the cheapest. Also consider the repayments and find out how much they will be so that you can calculate whether you will be able to afford to pay this. Make sure that you really carefully consider this and do not just guess. Actually, look at your bank statements and think about where the money will come from. Then you will be in a position to start to consider it. You will have to find someone to be your guarantor and this can be tricky. Not everyone will want to do this sort of thing and no everyone will be able to as they will have to have a good credit record and the money available to be able to afford the repayments. You will also need to discuss with them what will happen if they do have to make a payment or multiple payments. They may want you to pay them back or they might not mind. But it will be really important to make sure that you come to an agreement between you so that you know exactly what will happen. It could even be wise to write it down so that you cannot disagree about it afterwards.