Published: 22/02/2021

Guarantor loans and more

Your guide to guarantor loans and more

What type of loan do you want?

There will be times when you need to borrow cash, and your credit card simply won’t do the job.

With any other form of borrowing, your credit history will play a big role. The cheapest personal loans are for those with impeccable credit records.

If you have the odd black mark in your credit history, any loan will likely come with a higher interest rate, costing you more in the long run.

It’s important to keep your credit record as good as possible. There’s a lot you can do to improve your score.

Guarantor personal loans

Guarantor loans are an option for people who might struggle to get a personal loan from banks or other lenders.

You need to find a guarantor ‒ perhaps a parent or other member of your family ‒ who will guarantee your payments, who will commit to cover those repayments in the event that you cannot.

Because the guarantor’s financial position is taken into consideration by the lender when you apply, it can balance any issues with your own credit history (assuming your guarantor has a better record of course)

Practically speaking, borrowers don’t see much difference if they take out a guarantor loan compared to a regular personal loan. You still borrow over a fixed term making monthly repayments towards paying off your guarantor loan.

In addition to helping people with a weak credit score get affordable credit, a guarantor loan may help those borrowers to improve their score, enabling them to secure credit in future.

Will you get the advertised rate?

Lenders advertise their rates with what is described as the ‘representative APR’. You may assume if you apply to that lender, and they accept you then you will get that advertised rate. Not so! Lenders are only obliged to offer that representative APR to 51% of successful applicants. So, almost half of those who apply and are accepted, may be told their rate is higher.

To improve your chances of being in that 51%, and getting the advertised rate, you will need to have a top credit record. 

Lenders such as 1Plus1 guarantor loans have only one rate as advertised.

How much can you borrow

This will depend on you, your creditworthiness and affordability and your credit score.  All of which we check if you apply for a guarantor loan with 1Plus1 guarantor loans. Both of you must meet 1Plus1’s affordability criteria.

Why do you need to borrow?

When you take out a credit card or, apply for an overdraft with your bank, the lender doesn’t ask you why you need it.

With a personal loan, the lender will probably ask what you want the money for.

They won’t ask for a full breakdown of precisely what home improvements you’ve planned or colour you’re repainting the kitchen, but they will want to understand why you are borrowing.  This may influence the term they are willing to offer for your loan.

How long will it take you to repay?

It’s an important consideration when applying for a personal loan. From the get-go, you are determining when the loan will be fully paid off.

Loan terms vary between lenders, and can range from as little as a year to as long as eight years.

A shorter loan term will cost you less in total as interest is charged for a shorter period of time. This means your monthly repayments will be a bit higher.

Longer terms mean smaller, more manageable monthly repayments but will cost you more overall.

The cost of paying it off early

Paying more each month or even lump-sums can reduce the amount of interest and save you money.  It’s worth checking precisely what it will cost you to pay off the loan early in a lump sum before you actually apply.

Last updated: 01/10/2021