Guarantor loans are a unique type of personal loan that are designed for those who have been turned down by their bank. The fact that they are a type of personal loan means that they can be used for almost any purposes – providing it’s legal, of course!
Throughout this article we are going to discuss how guarantor loans can be used to help your financial situations, and outline when they perhaps shouldn't be used.
1. Debt consolidation
One of the most popular uses for guarantor loans is debt consolidation. Customers use the guarantor loan to pay off high interest credit card or payday loan debt. There are many benefits to doing this; firstly, having debt in multiple forms can be overwhelming. You may not be aware of when each payment is due and how much you need to pay meaning before you know it you've missed a payment and incurred late payment charges. By consolidating each item of credit with a guarantor loan you essentially organise your finances into one manageable monthly repayment.
2. Purchasing a car
There are many different ways of financing the purchase of a new car; hire purchase, personal loans, dealership financing and savings to name just a few. The problem is, very few of these options cater for those with a poor credit history or no credit history. Equally, in these tough financial times very few people have the savings at hand to cover the cost of a new car upfront.
Guarantor loans allow those with a less than perfect credit history to get the finance they need and spread the cost of their car. Generally, guarantor loan lenders will offer between £1000 and £5000 meaning they are probably better suited to used cars than new cars. Alternatively, if your old car is in desperate need of some costly repairs, taking out a guarantor loan to fund them could prove much cheaper than purchasing a new car.
3. A holiday
Everyday working life can be taxing which is why a much needed rest can be just what you need to get away from it all. Unfortunately though, the rising cost of living has meant that many have found themselves unable to afford the large upfront cost of a holiday, especially if they have a family to pay for as well.
Many use guarantor loans to help fund the upfront cost of the holiday, purchase some holiday essentials or help with spending money. By stipulating the loan term and amount to fit their monthly affordability they can then enjoy their holiday safe in knowledge that they won’t be out of pocket when they return.
There are many valid and responsible reasons for taking out a guarantor loan, there are also some very irresponsible reasons. Generally, lenders will not lend money for a purpose that they don’t deem to be irresponsible, these reasons may include; fueling a gambling habit, an unnecessary spending spree or extravagant gifts for loved ones. It is important that before you apply for a loan you ask yourself the questions; do I really need to take out a loan and am I going to leave myself in financial trouble as a result of taking out this loan? If you can confidently answer the first question yes and the second question no then go ahead and apply.