Sometimes you need a little financial aid in life to help you out of a rough patch. Yes, seeking a loan for things like wedding costs or consolidating debt can be tricky, especially if you don’t meet the strict criteria of some lenders. And if you’re looking for a loan, and have had no luck from traditional lenders, then it can be very disheartening. Banks and high-street lenders may turn you away if you’re credit score isn’t great. However, there is a way you can borrow money without having the ‘right’ credit rating.
Guarantor loans have become a new way for those with less than desirable credit to borrow money. Loans with a guarantor are an effective way to borrow money for pretty much anything, as long as it’s legal. But how do they work and what can you use your guarantor loan for?
In this post, you’ll find out about the most common uses for guarantor loans and a little bit about how they work, and why they’re different from traditional loans. Say hello to your new guarantor loan!
What is a guarantor loan?
Your guarantor loan is a little different to other types of loans. It’s one of the few types of loans that do not rely on your credit score. Whilst banks and other lenders will perform a credit check, guarantor loan companies do not require you to disclose your credit history. That’s because you loan is backed up by a guarantor. Loans with a guarantor mean that even if your credit score is bad, your guarantor (should they have good credit) will be able to back your loan application.
If you can find yourself a guarantor, then you could land yourself a loan. For most loan companies, like TFS Loans, your guarantor must meet the following criteria:
- Be between the ages of 18 – 78
- Have good credit
- A regular income
- Be a UK homeowner
Your guarantor can be pretty much anyone, as long as they match the criteria listed above. That means a friend or family member can be your guarantor, or even a boss, colleague or your landlord. It’s a form of trust-based lending which is different to other lenders.
Loans with a guarantor ask for one simple thing. And that is that should you be unable to make any of the monthly repayments, your guarantor will agree to cover the costs. However, most lenders only will look at this as a last resort (they will aim to set up a repayment plan instead).
Now, we get into what you can use your guarantor loan for…
Guarantor Loan Common Uses
Because a guarantor loan is an unsecure personal loan, it means it can be used for anything you see fit (we emphasise it must be legal!). An unsecure loan means that your possessions or property won’t be up as collateral against the loan.
Many of those who take out a guarantor loan use it to consolidate their debt. If you’re struggling with multiple credit card and loan repayments, you may find it easier to merge those payments into one. With a guarantor loan, you can borrow anywhere from £1,000 – £15,000, which means you could sort out your debt, be it large or small. By using your guarantor loan to sort out your debt, you could find your repayments a lot easier to manage (as they’re merged into one). Whilst it’s not ideal borrowing more money when you’re already in debt, it can be beneficial to help manage debt.
Weddings are no cheap thing. No matter how small you go, it’s normally ends up as £1,000+, and sometimes you just don’t have that money to hand. You can save and save, but life happens, and you have to use your savings for other things. If you want the money to fund your big day, a guarantor loan is great. Most young people don’t have a great credit score, or the savings for a wedding, so a guarantor loan can help your wedding a little closer.
Another use for loans with a guarantor is car financing. If you take out a guarantor loan, you can pay for a car, upfront, meaning you will own it – unlike car financing schemes. Sometimes, car dealers will give you a better offer if you pay with cash. Once your application is approved, and your money is in your guarantor’s account, you can draw the cash out and pay for your car. You’ll own the car and might get a better deal too. Your guarantor loan can be used to fund your new car.
Self Employed Loans
Being a small business owner can be tough, especially if you find that you don’t pay yourself a fixed income. You may pay yourself from dividends or through contracted work, but when you need a loan to improve your business, traditional lenders will need to see a receipt of a regular income. This can be a problem for self-employed business owners. However, a guarantor loan can be used for any aspect of your business. Whether it’s improvements to your business or funding the next step, a guarantor loan has you covered.
If you’ve been meaning to take a holiday for a long time, a guarantor loan is a perfect way to finance it. Some find that a guarantor loan can be an ideal way to book a holiday, as they can pay for it instantly, when they find the best deals, then pay it back later. A guarantor loan is yours to use, so if it’s a holiday you desire then you can use it for just that.
Expanding your home is costly, however with a guarantor loan you can finance your home’s renovation. Whether it’s a repair or an extension, these loans with a guarantor can cover it. Like we’ve said, it’s a personal loan so it can be used for pretty much anything.
Above are just a few examples of what your guarantor loan can be used for. Whilst many loan seekers choose to use their loan for weddings, debt consolidation, car finance etc. you can use your own loan whatever you like. But please, make sure it’s legal…