Compare Guarantor Loans
For anyone to be approved for a home, car, or any line of credit, a lender will gauge one’s credibility and creditworthiness from their credit report. If it comes back that an individual has poor credit, then they will get respectively denied for the loan or credit line, even though it may be their dream home or car. However, it does not always need to be this way. For all of those who are suffering from bad or poor credit, there are opportunities still available for you to secure a loan through something known as a guarantor loan. These types of loans may be your best option to not only secure the capital you need – it may be your best option to improve your credit score.
What are Guarantor Loans
For beginners, it’s important to understand what guarantor loans are. Most commonly, people mistake guarantor loans for simply co-signing. However, guarantor loans are gravely different. Guarantor loans are a type of loan where a borrower selects a guarantor, who is essentially attached to the specific loan, for approval. Typically, borrowers in a guarantor loan have poor or bad credit. As a result, lenders require them to find a guarantor to minimize the risk factor.
A guarantor is an individual with good-to-excellent credit and knowledgeable about the financial industry. While Guarantor Loans are like a regular loan, the rates, fees, and charges will change, given the risk-factor associated with the borrower. For example, with a guarantor loan, a lender may begin charging an average-to-higher interest rate; however, if the borrower is late once, the interest rate will spike well into the 40% range.
The Advantages of Guarantor Loans
Guarantor loans present a new world of opportunity for individuals that are suffering from poor and bad credit. In other words, if one can handle the monthly payments, a guarantor loan can provide more benefits than you can imagine.
One of the biggest advantages of guarantor loans is that these loans typically do not require a lengthy approval process. In fact, many financial experts argue that Guarantor Loans offer the fastest approval times on the market. So, if you are applying for a guarantor loan for an emergency, you can expect the extra capital relatively quickly.
Furthermore, guarantor loans also are known to offer greater flexibility than other traditional loans. This can be attributed to the fact that these loans are certified and backed by a guarantor, an individual with good credit. As a result, lenders tend to give borrowers and extended period of time to pay-back their loan. There is a minor caveat to this advantage. While it’s great there is added flexibility, this should not encourage borrowers to take their time paying back these loans. It’s a standard rule of thumb that, the longer a loan remains open, the more interest the loan will build. In other words, the longer it takes to pay off a long, the more money you will actually pay.
On another note, given the nature of these loans, borrowers are not limited to the amount of money they can request. Typically, traditional loans place limitations on borrowers, which can be frustrating. So, if you are in need of a specific amount of money and struggle to be approved, a guarantor loan may just be your best bet.
In our opinion, the most significant and grand advantage that Guarantor Loans offer borrowers is the opportunity to improve your credit score. Through paying your monthly bill on-time, you are taking strides to a more financially sound future. In fact, through improving your credit score with a Guarantor Loan, you may never need a guarantor or co-signer again. On top of this, the more you improve your credit score, the better rates you will receive and the more money you will save in the long run.
The Disadvantages of Guarantor Loans
As you can tell for the many advantages, Guarantor Loans are most certainly a valuable option for individuals suffering with bad credit. However, as with anything in the world, where there are advantages, there must be disadvantages. What every credit-holder must take into consideration is the potential dangers of interest rates.
With bad credit Guarantor Loans, they are known by financial experts as the loan with one of the highest interest rates on the market. While, when you first open the loan the interest rates may be standard, the moment you are late once, the interest rates can spike close to 50%. If you are not aware, such a spike will significantly extend the life of the loan, causing the borrower to pay more money back to the lender. In light of this, many financial gurus refer to these loans a “default loans”. This is because so many people who tend to open guarantor loans, without proper knowledge and preparation, tend to default on these loans. This, ironically, leads us to yet another disadvantage one must consider.
Given the style of these loans, a guarantor loan could place a borrow in a quite perplexing situation. Reason being, if a borrow misses a payment or defaults, their guarantor, which typically is a family member or friend, will be responsible for covering missed payments, or the entire loan. As a result, this may lead to an unstable or rocky relationship and heated arguments. Keep in mind, a guarantor loan puts both individuals, the borrow and guarantor, at risk. Until the loan is paid in full, a guarantor will be responsible.
Who Can Be Your Guarantor?
While comparing guarantor loans is vitally important, it’s also important to consider who your guarantor may be. In fact, in picking your guarantor, it may make it much easier to compare guarantor loans. With that being said, as we stated above, it’s important to always consult with different lending companies as they may have more extensive requirements than what we are about to share. In fact, the following is the basic principle and guidelines as to the requirements of a guarantor.
- A guarantor must be at least 18 years or older. Some lending companies may require a guarantor to be at least 21 years or older.
- A guarantor must hold a full-time job, with salary, and in good-standing with the company.
- A guarantor must be someone other than a borrower’s spouse.
- A guarantor may not share any bank accounts with the borrower.
As far as the different options for who may be your guarantor, there are three different categories. We highly advise to take your time when making this decision. Picking a guarantor is a massive decision that holds implications for not only you, but also the individual that you choose. Here are the three different options available:
A family member is considered the number one best option for a borrower when it comes to picking a guarantor. This may be a parent, sibling, or even distant relative. However, it’s important to keep in mind that you must not share any banking information with this individual. You should also trust this family member with your personal finances.
If you are unable to choose a family member for any reason, perhaps you have a friend with outstanding credit that you trust with your personal finances. With that being said, choosing a friend is most certainly a risky option. So, be careful and pick a trustworthy friend who will hold you accountable.
As the worst-case scenario, some borrowers may end up having to ask a colleague for financial help. Typically, this option is rare; however, it’s still one to consider. If you have no friends or family with good friend or are feasible options for you, perhaps you can consider a colleague that you trust and is creditworthy.
Three Common Traits of a Good Guarantor
- Trustworthy – A good guarantor is an individual that you can trust with your personal finances. Money is already a difficult and controversial subject to discuss – you should have no problem discussing money with a guarantor. A bad-credit guarantor loan will require you to be transparent with your family, friend, or colleague.
- Financial Stable – Another common trait of a good guarantor is an individual that is financially stable. When we stay this, we mean an individual that holds a full-time job and can prove good-credit scores and financial habits. The good credit will help in securing the loan and the financial habits may be beneficial for you to learn from.
- Willingness to Help – Before you can even secure someone to become your guarantor, they need to have the willingness to help you. This is a significant financial decision for both parties and, with an individual that has the passion to help, they will most likely hold you accountable and ensure monthly payments are met.
The Different Types of Guarantor Loans
In the financial industry, there are many different types of loans. On a finite scale, there are even variations of different types of loans. When it comes to Guarantor Loans, there are a wide variety of different uses and types for these loans. Considering this, as we will discuss later, it’s vital to pick a lender who offers the specific type of Guarantor Loan that matches your needs.
Typically, Guarantor Loans are designed for individual for emergencies. This may range from emergency home repairs, education loans, or even weddings. In some cases, people even opt-into Guarantor Loans for personal commercial uses, such as electronics or other impulse purchases.
With that being said, Guarantor Loans can be segmented into different types depending on loan terms, loan amounts, APR, and even the use, such as: automotive, home, or emergencies. Given the wide variations of Guarantor Loans and segments, it’s vital that borrowers take great caution when comparing guarantor loans, and ultimately picking one, which leads us to our next topic of discussion.
The Top 7 Tips to Compare Guarantor Loans
If you are in the market for a loan, it’s without question that you need to compare the different options that are available to you. In the Guarantor Loan field, there are dozens upon dozens of different lenders and loans, all potentially worthy of your consideration. So, to better help you prepare and dissect this information – we have generated a list of valuable tips to guide you during this process. Before we jump in, our best advice is, if you ever have any question regarding a specific company or their product, write it down and ask. Otherwise, utilize our proven tips when comparing guarantor loans to secure the best possible loan for you.
Type of Loan
When you are in the market and comparing different guarantor loans, it’s important to always take into consideration the different type of guarantor loans that are out there. In doing so, be sure that, when looking at different companies, they are offering a guarantor loan for your specific need. For example, does this company specify in guarantor loans for individuals seeking to purchase a car or home? However, perhaps you are looking for something specifically for emergencies and home repair. There are designated lending companies intentionally helping borrowers like you. Now, this is a very common mistake that many people make, ultimately resulting in an unhappy borrower and a potentially defaulted loan. So, always do proper research!
To compare guarantor loans, it’s important to always start by looking what a lending company specifically can provide you. In other words, what are their loan amounts? Do they have limits or are they flexible? This is of primary importance, especially depending on your specific needs. You may find on your research many Guarantor Lending Companies offer loans between $500-$5000; however, if you look closely, you will find companies that offer loans well above this marker. So, to properly compare guarantor loans, you must always consider the different loan amounts between companies. This will most certainly become a deciding factor. Do keep in mind though, the higher the loan amount, the longer the loan term may be, resulting in higher interest rates and expenses.
If we can stress any tip more than anything to compare guarantor loans – always take the time to study a lending company’s specific loan terms. Guarantor Loans are known to be one of the most flexible loans on the market. In light of this, to gauge the flexibility of a lending company, you can look at their loan terms.
Now, what is so important about loan terms? Well, if you are in need of large loan, you will want to ensure that, when comparing guarantor loans, companies offer more than the typical one-to-five-year loan term. You may always choose to contact a lending company to inquire about their loan-terms as well. Sometimes, they may be willing to work with you. We do offer one piece of caution: be careful of extended loan terms. These most often result in higher interest rates and extended loan expectancies. In turn, borrowers will end up paying thousands more than the anticipate loan amount. If you plan to seriously compare guarantor loans, don’t forget this tip!
Annual Percentage Rating
Aside from loan terms, another great tip to compare guarantor loans is to carefully analyze each company’s APR. In this market, a company’s APR speaks volumes about what a borrower can anticipate. Now, as we said earlier in this article, because of the nature and riskiness of these loans, APR rates will be significantly higher. We suggest taking the time to consider each company’s policy and what their introductory APR rates are and the go-to APR rates are. If you are not sure what this means, we are referencing what you can anticipate the moment you open the loan and, under specified circumstances, what the APR may go-to if such circumstance occurs. For example, is the introductory rate set for 6 months? Better yet, is the APR variable and contingent upon on-time payments? On your journey to compare guarantor loans, take this into account. This is one of the easiest ways to weed away money-hungry companies.
Another pertinent area to take into consideration when comparing guarantor loans is to study the different lender’s requirements. A standard rule of thumb to quickly adopt is that not every single lender will require the same exact thing. In fact, in many cases, lenders will have different requirements for not only borrowers, but also the guarantor.
For example, there are many different Guarantor Loan Providers that require all guarantors to be home owners. You will quickly find, in comparing guarantor loans, that lenders offer the best rates on guarantor loans for individuals with guarantors who own their home. In other cases, as far as borrowers, they may require that they have a specific monthly income or even credit score. All this information can be found on a financial company’s website.
As you begin to discover what companies you particularly are interested in, take the time to ask for quotes from at least three-to-five different lenders. This is so you can inquire and learn what are their specific rates, fees, and charges. You can use this information to compare with their estimated prices on their website and what you learned earlier in your research. In our opinion, this is one of the best tests to compare guarantor loans. During this process, it’s important to know that companies should not charge for a quote. If you are having to pay for a quote, please continue looking. Also, if a lender is forcing you to be obliged to any contracts or anything of that nature, again, move on! Lastly, a simple quote should not impact your credit whatsoever.
In the digital age, one of the best and most concrete ways that anyone can learn about a business, including in the financial sector, is through customer reviews. We highly advise, in efforts to compare guarantor loans and perform the most thorough research, study exactly what previous borrower and guarantors are saying about their experience with any lending companies you are interested. We do wish to highlight that, in reviewing customer reviews, be sure to weed through the biased reviews.
Typically, the best and most thorough reviews can be found in the 2-4-star category. However, do keep a look out for whatever everyone is saying. Stay peeled for repetitious thoughts and reviews as they may tell a grander story. For example, if many people are sharing a negative expensive in regards to customer experience, it’s clear that the customer service offered by that company is not good.
Is a Guarantor Loan Right for You?
At the end of the day, the purpose of taking the time to compare guarantor loans is to ensure that not only is a lender good for you – but that guarantor loans are right for you. Whether you are looking for a bad credit guarantor loan or simply a guarantor loan for home repairs, you will be grateful knowing that we thoroughly researched and compared different guarantor loan companies and what they had to offer.
Before we finish, we would like to offer a few last words of caution. Be sure that you evaluate your potential guarantor as a trustworthy and creditworthy individual. While you may not want to think about it -depending on the caliber and amount of the loan, if a borrower defaults and a guarantor cannot afford the monthly installments, they may lose all their possessions, including their home. This is why it’s essential to only open a bad credit guarantor loan if you truly need it. Ask yourself the following questions:
- Do you need this guarantor loan to fulfill instant gratification?
- Are you witnessing an emergency and need financial capital immediately?
- Are you financially prepared? Have you established a new budget with financial habits to support the integration of this loan into your life?
Opening a guarantor loan is a serious deal. So, on your journey to compare guarantor loans, let us be your guiding force in providing the absolute best information.