Do I qualify for a guarantor loan?
There does appear to be some confusion regarding guarantor loans and who can apply for them and who qualifies as a guarantor. Here at www.anytypeofloan.co.uk we will explain in details exactly how the whole process works.
What is a guarantor loan?
A guarantor loan is an unsecured loan which means that a lender is effectively lending someone the cash without having any security against that loan. That means that the borrower does not have a house to put up against the loan. Why should this matter you may ask yourself? Well, it means that if the borrower of an unsecured loan is unable to pay the loan back (or doesn’t want to repay the loan) then the lender is going to find it very difficult to get this money back from the borrower. Yes, they could take them to court and apply a county court judgement against the borrower but it still does not mean that the lender will get repaid.
If this was secured loan then a lender has the option of applying to repossess the borrowers property and whilst this is a pretty drastic option, it does at least allow the lender an opportunity to get their money back (including all costs as well)
However, most young people do not have a property so they apply for unsecured credit. Now the other major problem with an unsecured loan is that because it is more risky for the bank to lend, it means that they will make the application criteria much more stringent than they would for a secured loan. The result of this is that many borrowers will simply be declined by the lender because they may have bad credit, maybe they are unemployed or a student or housewife. Whatever the reason, it will be extremely difficult to get a loan, even if it is just £2000.
That is where a guarantor loan comes in.
A guarantor loan means that the borrower will enlist the help of someone they know to ‘endorse’ the application. What this means is that the borrower in their own right would be refused or declined, perhaps because of the reasons we stated earlier such as bad credit or not working. However, by enlisting the help of a guarantor, the application is receiving the turbo boost of someone with a decent credit history telling the lender that actually, the borrower is a decent person to lend to because I am guaranteeing the application.
What does guaranteeing an application mean?
It means that the guarantor is saying that if for some reason the borrower is unable to make the payments on a loan, then the guarantor will step in and ensure the loan is repaid, thereby guaranteeing the loan.
Who can be a guarantor?
The guarantor can be someone you know but then again, they don’t have to be that close to you. You could ask your boss or another work colleague if you wish. A bit more closer to home and you could ask a member of your family such as mum or dad, brothers or sisters or even a distant relative. If you are still struggling you could even ask a neighbour.
What is the criteria for qualifying as a guarantor?
As long as the guarantor is 23 or over, a homeowner and has a pretty decent credit history then there is a very good chance that they meet the criteria needed.
And finally?
Remember this: the loan is assessed on the guarantor, not the borrower so there will be no credit scores for the borrower to undertake. All references and lender checks are done on the person guaranteeing the loan, not the borrower which is why the acceptance rate for all guarantor loan applications (with a suitable guarantor) with us is in the region of 92%.
