There are many loan options available and it can be difficult to know which might be the most suitable for you. It is therefore worth finding out a bit about the different loan types and then you can decide if it will work for you. This is something that you might want to do for guarantor loans which are a relatively new type of loan and therefore one that many people do not know a lot about. Then you will be able to make the decision as to whether this loan will be a suitable one for you.
What is a guarantor loan?
A guarantor loan is a loan designed for those with a poor credit record. As they normally cannot borrow significant sums of money, this loan is designed so that they can. It does require that the borrower nominate a guarantor. The guarantor needs to have a good credit record and be prepared to cover the cost of any repayments that the borrower is not able to make. Often the guarantor will be a family member but anyone can do it as long as the lender approves them. The loan will be repaid in instalments.
Who do guarantor loans suit?
The loans are designed to help those that have a poor credit record but need to borrow a significant sum of money. Normally, without a good credit record and with no collateral, borrowing options are very limited and this loan will extend those options beyond what is normally available. If you need to borrow a significant amount of money but cannot use a conventional loan, then this loan could be the answer.
Are they right for me?
Knowing whether a particular loan is right for you is a very personal thing. It will really depend on exactly what you are looking for in a loan and what you can afford and feel will offer good value for money. It is therefore worth getting together some information first.
- How much to borrow? – to start with you need to think about how much you want to borrow. It is likely that there is a specific thing that you are looking to buy and you will know how much that costs. However, it could be that you have some money that you can put towards it so work out the difference and how much therefore that you will need to borrow. It can often be tempting to borrow a bit more than you need so that you can treat yourself and this can be a problem. It is worth remembering that when you borrow money you will have to pay it back and pay interest on it and so you should borrow the minimum that you need to so that you find it easier and cheaper to repay.
- How long for? – It is possible to choose different repayment terms depending on the type of loan that you pick. Some loans can be paid back really quickly, but many people like a bit longer to repay so that they can mange the repayments more easily.
- Features of lender? – some people are really interested in what the lender has to offer. It might be that they want a lender they have heard of, has a good reputation or has good customer service. It might be worth thinking about whether there are any features of lenders that you think are important as well.
- Value for money? – many people just look at the cost of a loan and while it is important to know how much things are it is also important to think about what you are getting for that money. You need to decide whether you will be prepared to pay more money for certain loan features. It might be the case that you will not have to and a suitable loan can be found cheaply but it may be that you will need to pay a bit more to get what you want.
- Can I afford repayments? – it is really important to make sure that the loan you get is affordable. You need to find out how much you will be expected to pay and how often so that you will be able to check whether this is something that you can afford. You will also have to take a look at your finances and work out how much you will be able to afford to repay. You will need to look at how much income you have coming in normally and how much you usually pay out and then you will know whether you normally will have enough money to cover those repayments.
There is a lot to think about, but it is worth the effort as if you pick the right loan you will make sure that you have a positive borrowing experience.