If you are looking at the different types of loans and thinking about borrowing, you may wonder whether you should use a guarantor loan. It could be a suitable loan for you, but it is a good idea to find out more about it before you sign up for it. Find out how it works and then you will be able to work out whether it will be a suitable loan for you or not.
What is a Guarantor Loan?
A guarantor loan is a unique loan in that you do not need to have a good credit record to have one. However, you need to nominate a guarantor who will repay the loan if you cannot afford to. They will need to agree to help you out and have a good credit record. The loans tend to be for between £1,000 and £10,000 and will need to be repaid in regular monthly instalments.
Is it Right for me?
It is a good idea to start by thinking about what you want and need from a loan. Consider how much you want to borrow and how much you can afford to repay and then see whether the loan will offer what you want. It is of course important to be able to borrow enough money for what you want to buy, if you cannot get enough there is no point in borrowing anything. However, you also do not want to borrow too much because you will have to not only repay it all but you will also be charged interest on everything that you borrow and so if you borrow less you will pay out less. You also need to look at the repayments as well. You need to calculate whether you will be able to repay them. Find out how much you will be expected to pay each month and then work out if you could afford this. Look back at previous bank statements in order to calculate this. If you feel you will not have enough, then you might be able to change what you buy and spend less or buy less things to have more money available for the repayment. You may also be able to earn some more money, so think about if you might be able to do this. Of course, with this sort of loan. The guarantor will be able to cover repayments that you cannot afford. However, you will probably not want to have to rely on this as it is unlikely that you will want your guarantor to have to make that many payments on your behalf.
If you are happy that the loan will allow you to have the money that you need and you will be able to repay it, then this is a big positive towards using the guarantor loan. However, at this point it is a good idea to compare the different lenders. It is wise to think about what you want from a lender and see whether those that provide guarantor loans will match up to your expectations. There are lots of possible things that you could be looking for, perhaps a low interest rate and low fees. Low charges for missed payments, the option to overpay, good customer service or things like this. Think about what is important to you and then see whether there is a lender that will match up to your requirements. It can be worth prioritising them as it is likely that you may not find the perfect lender. It is also worth thinking about whether there are certain conditions that they have to meet and some that are optional but would be good.