Guarantor loans are unsecured loans that provide individuals with the chance of borrowing money even if they have a bad credit. It can, however, be a tricky process and even with a guarantor, getting approved for a loan is not always a safe bet.
However, finding cheap unsecured loans is possible as long as you are savvy about how you find one. If you’re thinking about getting a guarantor loan due to bad credit, do read the following tips to increase your chances of getting approved.
1. Be Open About the Risks
Most often, guarantors are parents, friends, relatives, or other people close to the borrower. It’s important to let them know the risks and responsibilities that come with the borrowing. Make sure that you inform them of the whole process and give them proof that you’ll be able to repay your debt in time.
2. Pay on Time
Having a guarantor does not necessarily mean you can get bad credit guarantor loans without additional effort. The bank will look at your credit rating to see if you can realistically pay the loan back in due time. Generally speaking, the amount should be somewhere within 1/10 of the borrower’s monthly salary. If you repay your debt successfully, you should see your credit worthiness improve significantly.
3. Do Your Research on the Lender
One of the most important steps you should be taking is choosing your lender wisely. It’s best to ask several lenders for quotes and choose one that can offer you the amount you need. Even with bad credit, you should be able to borrow a decent amount of money. To give you an idea on how much you can usually borrow, consider the fact that lenders such as TrustTwo offer guarantor loans from £500 to £10,000.
4. Look for a Low Interest Rate
When choosing any loan, make sure to negotiate the rate of interest. Furthermore, always compare the interest rates offered by various lenders to ensure the best deal. If you choose to apply through a broker, they should be able to share all available deals and help you make an informed decision.
5. Stay Clear of Loan Sharks
There are a lot of loan sharks operating in the country despite the FCA’s strict guidelines. Be very careful when choosing your lender. Make sure that you do your research on them to learn if they are FCA registered. Registered lenders keep the terms of the loan transparent and your funds safe. Also get independent reviews from other people who have contracted loans with them. References from third parties will not only give you a better idea of the trustworthiness of the lender, but how smoothly the lending process went and things such as customer service and how long the approval process takes.
6. Be Patient
Most loans are received within 48 hours of getting an approval. However, there might be a longer delay if the lender can’t get a hold of the guarantor, if you live in Ireland or Scotland, or if you applied over the weekend. Some lenders also choose to transfer the loan into the guarantor’s bank account for security reasons and to make sure they agree to act as your guarantor.
These are the main things to keep in mind before applying for a guarantor loan with bad credit. If you do want to go through with the process, make sure to read the terms and conditions thoroughly before signing any document. And also, above all else, make sure that you go with a trustworthy lender with years of experience and a solid reputation for offering good repayment terms and reasonable interest rates.