Could You Use A Guarantor Loan?

By Author: Martin Sumner
Total Articles: 432
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Even back in the days of cheap and widespread finance, it was always more difficult for people with adverse credit ratings to have a credit application okayed. Of course, these days, the financial state of affairs means that unless you have near-perfect credit, taking out credit is a tough proposition. This is particularly the case for customers without a house to put forward as collateral who can only consider applying for for an unsecured loan.

Of late, a new sort of financial product has begun to come on the market which will be an interesting proposition to many applicants with poor credit histories who are struggling to get the loan they need. This new form of financial service is called a 'guarantor loan'.

The basic idea is that the actual applier for the finance doesn't need to have a good credit history, or even any credit history at all. All they require is a bank account and proof of identity, plus another very important thing: a friend or family member who is happy to endorse your application by being a guarantor.

This guarantor essentially agrees to take on the responsibility of making loan repayments ...
... should the principal applicant default on the loan. Because of this, the guarantor is required to have a secure credit history, and also be a homeowner.

Although guarantor loans have the plus point of making borrowing available to applicants who without them would have little chance of having their application approved, there are three major drawbacks. Firstly, not all of us are able to find someone inclined to stand as a guarantor who also has the required credit rating and security to offer.

Second, not everyone will feel comfortable with the thought of making use of their parents to secure their borrowing. Lastly, these loans are far from inexpensive when compared to ordinary unsecured credit - although they're far from as expensive as some other kinds of finance such as payday loans.

Despite these downsides, if you're desperate for credit and have been turned down everywhere else, and can persuade someone to sign up as a guarantor, then one of these loans may be precisely the sort of thing you've been searching for.

About the author: Martin writes for http://www.unsecured-loans-for-tenants.co.uk/ where renters of all financial backgrounds can apply for an unsecured loan.