If you happen to have a good credit score, you will be fortunate enough to be able to benefit from near record low borrowing rates on a wide range of credit products, such as loans, credit cards, overdrafts, and mortgages. If on the other hand your credit score is less than perfect, the red carpets will quickly be rolled back and the doors to the mainstream lenders will unfortunately be slammed shut. Much to the fury of many consumers, the banks and other mainstream lenders remain very cautious and risk averse when it comes to the subject of consumer lending, which has strongly worked in the favour of the payday lenders.
People turn to payday lenders for lack of a better idea
The constant barrage of TV adverts and press surrounding the payday lenders means that they are more often than not at the forefront of people’s minds, so when somebody is rejected by their bank, it is often the payday lenders who have been the first port of call immediately after. And make no mistake, they are convenient! But however convenient their quick pay outs and a no questions asked approach to lending may be, the simple fact is that the enormous interest rates of easily over 4,000% APR can be crippling and there are hundreds of thousands, if not millions who have quickly found themselves struggling in a debt spiral after their payday loan repayments have spiralled out of control. With this in mind it is unsurprising that consumers have increasingly been turning to alternative means of borrowing money when they are in a financial pickle, and of all the alternatives out there, guarantor loans have increasingly become the borrowing option of choice for those with poor credit.
What is guarantor lending?
Guarantor lending may appear at first glance to be a new approach to borrowing but it is in fact a throwback to a more old fashioned form of borrowing from years gone by. A guarantor loan applicant will be asked to find a friend, family member, or colleague to co-sign their loan and act as their guarantor, and in return for this they will be able to borrow small to large sums of money over a short to longer-term time frame. And more importantly, not only will a guarantor loan be flexible but it will also offer much lower rates of interest and a much more affordable loan all round. A borrower will be able to borrow anywhere between £1,000 to £7,500 over a 1 to 5 year period, but importantly they will be able to do so at a much more reasonable 47.9% APR; just to paint a picture, a guarantor loan of £3,000 taken out over 3 years will cost £143.98 per month in repayments. Now this, compared to a payday loan which charges around £25 for every £100 borrowed, represents a much more suitable borrowing option if you are looking to consolidate debt, replace a car, or cover a large unforeseen expense. Your guarantor, who will need to have good credit and be between 25-65 if they are a tenant or 25-72 if they a homeowner, will not be contacted under any circumstances unless the borrower cannot meet repayments. So if you need to borrow, why not go for a guarantor loan?