About Guarantor Loan

If you are facing any difficulty to get a loan due to your poor credit score, a guarantor loan might be a good alternative for you. This is where a family member or a friend steps in to give a guarantee to pay the debts if you miss out on the repayments. A guarantor loan is an unsecured loan which means that none of your assets is attached to the debt.

Guarantor loans are preferred by those with a bad credit profile. The lenders fail to offer them a loan without any guarantee. The guarantor will be called upon only when you make a default in your repayments. The guarantor loan may also boost up your credit score as every time you make a timely payment on your debt you are marked “good “as per your rating. But before going ahead with such loans it’s better that you keep a check on your credit rating or else you may face rejection and may end up damaging your credit score.

Frequently Asked Question

Who qualifies as a guarantor?
Your guarantor is a person that knows about you at least for 2 years, the guarantor can be a close relative or a friend. The guarantor should be able to confirm your identity.
Can you remove your guarantor from your loan?
Yes you can, but it all turns down to your loan value ratio(LVR), this will be the major concern of the bank, LVR is the percentage of the your remaining loan amount against the value of your property.
Is it a good idea to get a guarantor loan?
A guarantor loan is a perfectly legitimate way to help someone with a poor credit rating get the finance they need. There is a financial risk involved, especially if you are a guarantor. However, the level of risk is no higher than it would be from a regular bank loan.
Yes, it helps someone with a bad credit score, but the guarantor might be at risk, but not so high risk compared to a regular bank loan.
Does your guarantor need to be working?
No, but must be between the ages of 18-75, a UK resident and their records must be clear of bills payment, their affordability of the loan should also be declared if you do not make the repayment.

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How Does A Guarantor Loan Work

Guarantor loans can be resorted to when your standard loan application has been turned aside. To secure a loan you need to be at least 18 years of age. The guarantor should be aged above 21, besides possessing a good credit rating and financial stability. Being a risky affair for the lenders, the interest rates on such loans is higher than the standard ones.

The repayment term for such loans is usually one to five years with the payments are split into monthly installments. Of course, if you make a default in your payment, you may end up paying interest which may further sink you into debt. The rate of interest charged will be determined by the loan amount and duration, personal circumstances of the borrower.

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