Guarantor Loans FAQs
Are you looking into getting a guarantor loan? Or maybe you’ve been asked to be a guarantor? Before you do anything, read this post! We’ve got FAQs on guarantor loans, to answer all your burning questions.
Guarantor loans are a great way for people with bad credit to borrow money. The problem is, deciding to get one is never easy. You may be on the fence and have so many questions you need answering. The problem is, you’ve got no-one to ask. No finance experts or anyone who has had a guarantor loan before. So, what to do? Well, read our post of course!
Yes, in this post you’ll find loads of frequently asked questions (FAQs) on guarantor loans. Everything from ‘who can be a guarantor for a loan?’, right through to ‘what does being a guarantor mean?’ We’ve got all the essential information you need to make an informed decision on getting yourself a guarantor loan. Let’s get into it, and dive in.
Guarantor Loan FAQs
- What does being a guarantor mean?
The first question is for those what have been asked to be a guarantor. You may have asked yourself ‘what does being a guarantor mean?’ If someone you know has asked you to help them out with their guarantor loan application, this is the first thing that comes to mind. Whilst there’s a lot of responsibility being a guarantor, there’s not a great deal you have to do throughout. Whilst we don’t mean you’re void of all responsibility; your role only comes into play should the borrower be unable to pay.
After you sign the forms, to be a guarantor, you’re agreeing that should the borrower be unable to make a payment towards the loan, you will cover the costs for them. As long as this doesn’t happen too frequently, and when it does you’re paid back, being a guarantor isn’t a huge responsibility. This means you need someone you trust borrowing the money – someone who won’t keep missing the repayments and making you pay. Being a guarantor is based on trust, so make sure you trust whoever is asking you.
- Who can be a guarantor?
So, this applies to both borrowers and guarantors. Whether you’re a borrower wondering if someone you know can be a guarantor, or if you’ve been asked to be one and are wondering if you meet the criteria, you’ll need to know what is needed to be a guarantor. Most guarantor loan lenders ask for a guarantor to:
- Be in receipt of an income
- Be a UK Homeowner
- Be between the ages of 18-78
- Have a good credit score
As long as your chosen person, or you, meet these criteria they/you can be a guarantor for a loan.
- How do guarantor loans work?
For borrowers seeking a loan, it’s not uncommon to wonder how a guarantor loan works. Because most loans and other lenders rely on you having a good credit score to borrow. So, with a guarantor loan not needing you to have good credit, you may be wondering how and why it’s different.
As your credit score establishes your reliability as a borrower, getting a loan with bad credit seems, strange. But guarantor loans aren’t your average loan. Because there’s a guarantor supporting your application, agreeing to cover any repayments you miss, it means that you guarantor is, essentially, backing you up. They’re your repayment reliability. And most lenders are fine, as long as their investment and interest on the loan is returned. You get your money and the guarantor loan lenders get theirs.
- How much can you borrow with a guarantor loan?
Whilst some other bad credit options, like payday loans, only let you borrow up to £1000, guarantor loans are different. Although, it does vary from lender to lender – one UK based guarantor loan provider offers up to £15,000. Most lenders however will always offer £1000 as the minimum you can borrow. Loan terms can be from anywhere from 1-5 years, but again this is dependent on the selected lender you have chosen to apply for. If you look around for all the different lenders, you can see how much you can borrow for how long too.
- What can you use a guarantor loan for?
Guarantor loans are personal, unsecured loans. Let’s break down what this means. An unsecured loan means that your property and possessions aren’t up as collateral against the loan. So, should you be unable to make repayments, no one will come and repossess your home or car. Whilst your guarantor covers the costs should you be unable to pay, it does not mean you have to put up anything as collateral against the loan.
As for the ‘personal’ loan bit, it means that your loan can be used for pretty much anything. Although, all lenders stress that your loan should not be used for illegal purposes. But, if you’ve got a personal loan, it’s your own. Which means you can use it for a holiday, to consolidate outstanding debts and even for a business (if you’re self-employed and don’t have good credit). As a personal loan, it can be used for anything you see fit.
- How quickly are guarantor loans approved?
Some lenders can approve guarantor loans within 24 hours, providing all the paperwork is completed. Which means, when you apply you’ll have to ensure you have a guarantor ready, to sign the paperwork. Dependent on how quickly the paperwork is completed and signed off, most lenders will transfer the funds into the guarantor’s account – for the guarantor to then pass over to you (the borrower). Once all of this is completed and done, you could have your loan in 24 hours. However, this is dependent on the lender, and you’ll have to ask them how long it could take.
So, if you’re looking into getting a guarantor loan or become a guarantor, it’s important to look around for the right lender. What’s more important however, is to make sure that you can afford the loan. Taking out a loan you cannot afford can lead to financial troubles, so always seek independent financial advice.