There is no doubt that that the financial landscape has changed considerably in the wake of the great recession, particularly in terms of the lending options available to borrowers. Whereas individuals with a poor credit score or history were unable to successfully apply for a loan prior to 2007, there are now alternative avenues that empower this demographic.
One of the newest additions to this burgeoning market is guarantor lending, which enables you to take out a direct, short-term loan while a nominated second person acts as a guarantor. This provides collateral for lenders while enabling borrowers to benefit from relatively favourable interest rates over time.
Are Guarantor Loans Suitable for you?
One of the first things to consider is the amount that you can borrow through a guarantor loan, which may reach up to £12,000 depending on the precise firm that you choose to partner with. As a consequence this, the repayment terms are typically less challenging than those associated with alternative forms of short-term lending as your agreement can be settled over months rather than weeks. Not only does this translate into more manageable monthly repayments, but it also enables the lender to minimise their risk and charge drastically reduced interest rates in comparison with other sectors.
These terms clearly create a more credible and manageable lending arrangement, and this at least partially explains why the government has refrained from aggressively targeting the guarantor loan market. This option is not suitable for everyone, however, as the main distinction in this market is that borrowers must be able to appoint a credible guarantor who provides the collateral for the loan. Not only must this individual have a positive credit score, but they must also have the means and willingness to assume responsibility for the loan if you default on your repayments.
Our Final Thoughts
The key to succeeding with this type of loan revolves around your ability to borrow responsibly and met your repayments. If you do decide that this is your best option for securing some much needed funding, for example, you will need to ensure that you borrow a reasonable amount that can be easily repaid. This enables your guarantor to serve a purely peripheral role, as they simply lend their credibility and credit score to your application while making it possible for you to be successful.
To find out more about this type of lending and the precise responsibilities of those who assume the role of guarantor, check out www.trusttwo.co.uk to explore the market in greater detail.