While there are less guarantor loans on the market than other types of finance such as; personal loans for good credit or homeowner loans, if considering taking out a guarantor loan comparing products from different providers to try and find the best deal can still be wise.
You can use the calculator on this page to view a variety of different types of loan from a selection of providers, some of which are guarantor loan products.
About guarantor loans
Guarantor loans are a type of finance designed for individuals who either have a bad credit history or lack any credit history, who would find it more challenging to be accepted for a regular loan product. They work by having a third party, usually a friend or family member of the borrower, signing a contract to agree to repay the debt the lender if the borrower fails to make their repayments.
Agreeing to be a guarantor on a loan is not something that should be taken lightly, if the borrower fails to make a repayment this debt then becomes the guarantor’s responsibility to repay, some guarantor loans can be secured against the guarantor’s home which means they risk the lender repossessing their home if they cannot repay the loan debt.
General requirements for who can be a guarantor include:
- They must be aged at least 21 years old
- Have a good credit score
- Have a permanent UK address
- Have a bank account
- Some lenders may require them to be a UK homeowner
The Annual Percentage Rate (APR) offered on a guarantor loan can vary by provider as well as by other factors such as loan amount and duration, guarantor loans may allow a borrower to borrow more than they would be able to using other bad credit finance; however, despite the guarantor aspect these types of product do still tend to offer higher rates of interest than would be expected of a good credit personal loan.
Before applying for a guarantor loan
In addition to shopping around different guarantor loan products, a borrower may want to find out what their credit score is to see if they could secure other finance for better credit ratings. They may also want to consider other options, for example; if the borrower already has the sum in their savings they may want to use those instead, this is because the interest rate they earn on their saving is likely going to be considerably lower than the interest rate they would be charged on a loan of the same size.