If you have taken very little credit in your life or if you have taken credit before but ran into difficulties in repaying, you may have a low credit score. In cases like this you will probably find it difficult to get further credit and one way to get credit and rebuild your credit score is by getting someone to offer a guarantee for your loan i.e. if you don't pay, they will - this is a Guarantor Loan.
How do Guarantor Loans work?
The mechanics of a Guarantor Loan are just like any other loan. You take an amount of money over a certain term and repay monthly. With Guarantor Loans the maximum you can borrow is generally £10,000 and the maximum term is 5 years.
Who can be my Guarantor?
This can be any friend or family member aged 25-72 as long as they are not your partner/spouse. They'll have to be of good credit standing and be in receipt of an income.
What does the Guarantor have to do?
All they have to do is sign to say they'll make payments if you don't and hopefully that's the last thing they'll ever have to do, assuming the borrower keeps up their payments. If the borrower fails to make a payment, the Guarantor will be asked to do it in their behalf. This is how Guarantor loans work.
Do I have to have a good credit score?
Your credit score doesn't have to be perfect but it does need to be above a certain standard. The advantage here is that the standard to achieve is not as high as it is with unsecured personal loans without a guarantor.
Do I have to be working to get a Guarantor Loan?
Yes. You will need to be in receipt of an income (benefits do not count) and show you can afford the loan.
How long to they take to arrange?
They can be done in 24 hours as the process these days is entirely online.
