If you’re like other people, whether employed or self-employed, chances are you once stuck trying to settle bills with limited cash. As such, you either had to curtail your expenses, borrow money from family and friends, sell some personal items, or apply for a loan from a lender.
For the most part, you’re more likely going to take a loan if the lender agrees to advance you the loan under friendly conditions — and of course instantly after all you need the money urgently. That’s where guaranteed loans come in handy.
What is a Guaranteed Loan?
Guaranteed loans, as the name suggests, are loans advanced to the borrower with the lender willing to assume debt obligation. As such, the typical guaranteed loans lender overlooks common components such as credit score, or in general, an unattractive financial profile.
Besides, borrowers have a high chance of getting a guaranteed loan compared to other kinds of loans that require a lengthy process.
However, due to the nature of guaranteed loans i.e, lenders taking risks, it’s imperative to understand that these types of loans are typically small, unlike secured loans where the borrower puts forward assets as security.
In as much as chances of getting a guaranteed loan are always high, guaranteed loans aren’t always guaranteed. That means a lender reserves the right of choosing whether to advance you with a loan or not based on the set criteria.
How Do You Get Guaranteed Loans in the UK?
Having an attractive credit score
A good credit score has always remained a requirement for lenders to give you a loan. For guaranteed loans, it’s no different although, in this case, it’s only going to increase the chances of acquiring a loan and are not a must. As you might’ve guessed, there are boatloads of guaranteed loan lenders in the UK and their evaluation criteria may vary significantly.
Having a regular income source
A regular income translates to an improved likelihood of repaying a loan hence, a great way of standing a better chance to acquire a loan. If you’re employed, for instance, it means you have a consistent paycheck every month. As such, lenders will be more inclined to advance you with a guaranteed loan. Those who are self-employed also stand a chance of getting a loan should they prove their ability to repay upon request by the lender.
Having no previous defaults
Having a history of defaulting on loans from other lenders automatically clamps down your eligibility. As such, do yourself the favor of clearing any defaults if any before you consider getting a guaranteed loan. This is not to say that having a bad credit history would lock you out — it only hurts your eligibility.
Having a good debt-to-loan ratio
At any point, you might have existing loans awaiting to be paid. If the lender gets to know this information, the debt-to-loan ratio should be good because it’s one of the many ways to let the lender know that you’re capable of paying the loan.
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What Does Guarantor Mean?
A guarantor is someone who agrees to pay your loan in case you fail to do so. A guarantor could be a relative, a workmate, or anyone else you have a mutual relationship with. In case you act as a guarantor for someone else, however, it may have a direct impact on your credit score.
Before making the decision of becoming a guarantor, it’s important to understand the risks it comes with. Possible risks could be repaying the loan they failed to or even hurting existing relationships due to misunderstanding between parties.
Who Can Be My Guarantor?
In the UK, a guarantor is a requirement for most lenders. Anyone can be your guarantor if you want to take a loan. For many, their relatives or couples are the primary sources. Friends and colleagues at work can be your guarantors as well.
However, many understand the risks that come with being a guarantor. As such, they may be hesitant which means you may be required to take time and talk to them before they agree.
There are requirements for guarantors as well, i.e they should have a good credit history and be over 21 years, among others. One important component to underscore is that trust should exist between both parties before they agree to be your guarantor.
Benefits of a Guarantor Loan over Other Loans
There are many benefits guarantor loans have over other loans. One of them is clamping down on predatory components such as high interests which are typical in payday loans. Many financial institutions are also more willing yo to advance you a loan with a guarantor since it adds an extra layer of security.
If your financial profile isn't attractive, getting a loan can be grueling. With a guarantor, however, you stand a better chance of becoming eligible.
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Representative Example: Rates from 43.1% APR to 1333% APR. Minimum Loan Length is 1 month. Maximum Loan Length is 36 months. Representative Example: £1,200 borrowed for up to 75 days. Total amount repayable is: £1506. Interest charged is 0.34% per day, amounting to £306, annual interest rate of 124% (variable). Representative APR: 49.7% (variable).
Is There Any Risk of Guarantor Loans?
Risks are inevitable in the financial landscape and you can bet there are risks for taking guarantor loans. If someone becomes your guarantor and for some reason, you fail to pay the loan, they will be held responsible for the repayment. In case, they’re not in a position to do so, the lender reserves the right of seizing your personal properties. If that happens, your credit score will be drastically affected and your overall financial profile tarred. As such, the chances of receiving a loan in the future reduce.
Besides, convincing someone to be your guarantor can be difficult especially if they’re not your relatives. This also means guarantor loans are riskier to the guarantor since they are obligated to repay the loan in case you default.
Is It Possible To Get a Guaranteed Loan If You Are Unemployed?
It’s very much possible if you meet the minimum requirements which tend to vary from one lender to the other. However, having a stable income would give you the upper hand in acquiring a guaranteed loan. Due to the fact that unemployed people can be less-eligible for guaranteed loans, getting a guarantor to co-sign the loan agreement goes a long way in easing the entire process.
Guaranteed loans are a great way of unchaining yourself from a short-term financial difficulty. In the UK, whenever you’re looking for a lender, be sure to check if they’re certified and authorised to conduct operations by the Financial Conduct Authority (FCA). This would ensure you’re borrowing from a trusted source.
Although chances of getting a guaranteed loan are always high, don’t fret in case a lender rejects your application. Consider applying from a different lender connected with UKBadCreditLoans.
While at it, be careful by ensuring the correct information is provided and that no spelling errors or omissions are done prior to submission.
Lastly, be sure to repay your loan within the agreed period to increase your chances of getting another loan in the future.