There is no doubt that the word ‘loan’ has a negative connotation. It may derive from the fact that a loan is a type of debt, which again has a negative reputation. It should however be remembered that not all debt is bad debt, in fact; having some debt can help to improve your credit history and indeed your financial situation.
Since their rapid rise in popularity, guarantor loans have struggled to stay out of the media spotlight. In times, guarantor loans have been criticised for their interest rates, debt collection strategies and lending criteria. However, as we’re often told, you shouldn’t believe everything you read in the papers; especially as it’s often over-hyped and over exaggerated. Throughout this article we are going to aim to dispel any myths surrounding guarantor loans and outline 5 benefits of them.
1. A bad credit rating can be considered
Having bad credit can make it tough to get your hands on the credit you need. Having been turned by the low rate lenders, you may feel that short term credit like payday loans are the only option available.
If you can find a friend or family member to support your application, guarantor loan lenders may be able to help, at a fraction of the cost of payday loans.
2. Long term solution not a short term fix
Whereas other subprime loan types may only be to offer up to £2000, some guarantor loan lenders are now able to offer up to £10,000 which is repayable over a term of up to 6 years.
This makes guarantor loans a genuine long term solution to financial problems. For example, if your car breaks down, you may be tempted to take out a payday loan to fix it. However if the car is old and there’s a good chance it will break down it may prove more cost effective simply to buy a new one outright. By using a guarantor to fund the purchase of a new car you could save yourself money in the long run.
3. Quick and easy application
Historically, the guarantor loan application was paper-based and time-consuming. Nowadays the process is based online meaning it can take less than 15 minutes to complete.
Having received your application, lenders can then have a decision within the hour and providing the application goes through successfully you can have the funds in your bank the very same day that you apply.
4. They can help to improve your credit score
Having no credit history is almost as tough as having bad credit history these days. This is because lenders create predictions regarding future payment behavior which is based on your credit history. If lenders have no history to go by then they’ll be unable to make their predictions and will subsequently turn the application down.
Guarantor loans are a popular choice amongst those with no credit history. By proving that you are able to competently repay these loans you dramatically boost your chances of being approved for lower rate credit in the future.