If you’re looking to borrow a few thousand pounds then there are a wide variety of options available to you. Firstly, there’s the 0% purchase credit card which allows you to spread the cost of a large purchase and pay no interest on the balance over an introductory time period of up to 18 months. Then there are loans; depending on your credit history you could find yourself eligible for a small personal loan via your bank, an instalment loan, a guarantor loan, a logbook loan or a peer to peer loan. Of course, there may also be the option of borrowing from a family member or friend; however this luxury won’t be available to everyone.
Establishing a good credit score
If, like many, you’re a young adult who is looking to establish a good credit score and prove yourself as a responsible borrower then simply borrowing from your parents is probably not going to interest you. However, having never been responsible for repaying a large credit commitment each month, taking out a loan may be something that you are anxious about. In this situation a guarantor loan may be the best option for you.
The guarantor loan product
Contrary to popular belief, guarantor loans are paid out in the borrowers name meaning it is primarily the borrower’s responsibility to repay it. What this also means is that providing you keep up with the repayments throughout the loan term, guarantor loans will help to improve your credit history. The great thing is, if you are ever unable to repay the loan, you have the support of a third party individual (often a family member or friend) to ensure that the payments are never missed and your credit history is unaffected. In this sense you could essentially say that guarantor loans offer the perfect blend of independence and security.
Can I get one?
Guarantor loans are often described as a ‘bad credit loan’ product which means they are suitable for both those with poor credit history and no credit history. As I outlined above, you will have to find someone to support your application and guarantee the monthly repayments. The guarantor must be a homeowner who has good credit history and is receiving a regular income. Anyone can stand as guarantor, although some lenders will be unable to accept a spouse or partner as guarantor due to the financial link. As long as you can find a suitable guarantor and can comfortably afford the scheduled repayments of the loan, you have a good chance of being approved.
How do I apply?
The vast majority of guarantor loan lenders will now be based online meaning there is very little paperwork involved in the process. Search engine results pages will be littered with brokers and comparison engines so to avoid any hassle, always try to apply with those who are direct lenders. Providing both you and the guarantor meet the criteria of the lender then the loan can be paid out the same day as you apply.
Read more of our articles to learn more about the guarantor loan process.