The Advantages and Disadvantages of Using Guarantor Loans UK
Living in a financial crisis, people in the 21st century society their lives becoming more and more expensive. While it is possible to continue enjoying entertainment with a meal out every now and then, the expenditure is higher and amounts spent must be kept lower. Of course, there are always cases where a person or family will find it difficult to manage life’s costs for various reasons. In these situations, it may be necessary to obtain a loan; however, obtaining credit can be difficult if you already have a history of bad credit. If this is the case, the option of a guarantor loan may be useful. This article will provide information on the benefits and drawbacks of using a guarantor loan.
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What Is a Guarantor Loan?
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Guarantor loans UK are loans whereby unsecure credit is gained using another individual, typically a family member. The individual is known as a guarantor and will “vouch” for the person who needs the loan but has a poor credit history. As part of this type of loan, the guarantor will assure that if repayments are not made by the person taking the loan, then the guarantor is responsible for repayments.
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What Are the Benefits Of These Loans?
The primary benefit of this type of loan is that the person who could not obtain credit, due to a poor credit history, will have credit. This means that they can resolve the financial matters that caused a need for a loan. It should also be noted that this arrangement can improve a person’s credit rating because of the assured repayment situation. When organizing a guarantor loan, loan issuers are assured they will receive repayments from one of the creditors.
Another benefit of guarantor loans is the security for the person borrowing money. While both guarantor and non-guarantor are listed as responsible for repayment, there is an advantage to this type of loan in that it is not secured against assets and there is no risk of losing a home or car if payments are missed.
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What Are the Drawbacks?
One of the greatest drawbacks to a guarantor loan is setting it up. Needless to say, it can be rather difficult to locate an individual willing to be a guarantor as not many people are willing to act as a back-up for failed repayments. The majority of guarantor loans will have family members as guarantors making it less difficult to organize; however, there is a still a need for the guarantor to complete a credit check.
It is the case for many of these loans that the guarantor must have a positive credit history with a degree of affordability to ensure they will be able to provide assistance if necessary. Finding an individual who is willing to be a guarantor without having an impact on your current relationship is tricky and sometimes impossible.
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Final Words On the Matter
While guarantor loans are far cheaper than payday loans – another benefit; the information above shows the pros and cons that come with this arrangement. By using the information above you can make an informed decision as to whether or not the guarantor loan is best for your situation.
Author: Daniel Quinn
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