Got limited credit history? Had difficulties managing money in the past? You may find you’re only offered guarantor loans when looking for a loan. What is a guarantor loan? To understand what you’re actually being offered, here’s our quick guide to help you decide whether a guarantor loan is right for you.
A guarantor loan is an unsecured loan that requires another person to take on your debt if you don’t keep up your repayments. This is because based on the information the lender has, they need a little more certainty that the loan will be paid back.
If you’re thinking of taking a guarantor loan, you’ll need to find someone willing to be your guarantor, usually a friend or family member. Your guarantor can’t be financially connected to you, so that rules out partners or spouses. Your guarantor, needs to:
With a guarantor loan, 1Plus1 guarantor loans lends you money just like any other loan. You pay it back in monthly instalments, plus interest.
Key is that, if you become unable to repay the cost of your loan in full, your guarantor has to find the money to cover the payments. So, think about it carefully before you commit, if you’re thinking about becoming a guarantor for someone you know. Once you agree, you can’t change your mind at a later date.
If you’re confident you can afford to take out a loan, a guarantor loan can not only help you access the finance you need, but it can also help you build, or rebuild, your credit score. By making your repayments in full every month, you might find your credit score improves enough to make you eligible for other credit products in the future.
What’s more, if you’re keen to be financially independent as quickly as possible, once your credit score improves you may become eligible for a debt consolidation loan . You could then use this to pay off your previous guarantor loan.
If you are thinking of consolidating existing borrowing you should be aware that you may be extending the term of the debt and increasing the total amount you repay.
When you take out a guarantor loan, you need to be aware that your guarantor will have to cover the cost if you fail to pay back your loan. If they can’t, it can have a negative effect on their credit score and they risk being taken to court.
When looking at guarantor loans, look at the following things:
The monthly repayment, the APR (Annual Percentage Rate). The loan-term (how long you have to repay your loan).
Decide what is most important to you before looking. Are you looking for the lowest monthly repayments or would you like to pay off your loan as quickly as possible? Once you know what you’re looking for, you’ll be able to compare loans more effectively.
1Plus1 offer personal loans backed by a guarantor, subject to both the borrower and guarantor meeting our affordability and credit worthiness criteria.
If you think you may be interested in a 1Plus1 Loan, please give us a call on 0330 1200 313 and one of our friendly staff will be more than happy to discuss the process with you, or start your application here.