Why People Choose Us
You might be surprised to hear just how easy it is to apply for a short term or personal loan. Furthermore, you don’t even have to leave your chair to apply for it. Instead, you just simply fill out our very short form and if you are accepted by a lender you’ll get your loan by the next day.
Bank Loans And The Role Of A Guarantor
Oftentimes, those who are not able to meet the lender’s criteria seek assistance from a guarantor. Some of their problems include a bad credit rating, no credit history at all, or low income. Having another person vouch for you can increase your chance of getting approved, however, it’s not always easy. Unlike joint loans, the guarantor will not get any part of the loan except the responsibility to settle it in case the borrower defaults.
Whether you’re having doubts about cosigning a loan contract or you want to end your role as a guarantor, this article is for you!
What Is A Guarantor Loan?
The most important thing prior to affixing your signature to the loan agreement is to find out why a guarantor loan is. From the name itself, the loan requires another person who will act as a guarantor. The second person can be anyone except for the spouse. Meaning, it could be another family member, colleague, or a friend.
The amount offered is bigger than short-term loans, ranging from £1,000 to £15,000 and the amount that the lender can provide depends on the borrower’s financial status. This means that if you have a bad credit and you got approved, the money you can borrow is smaller than those who have excellent credit remarks. It is payable within a year or 7 years, depending on the loan’s terms and conditions.
The trust-based system that the guarantor loan provides is not new in the market, and it’s still used by mortgage companies and landlords.
How To Know If Guarantor Loans Are Best For You?
If you, yourself, are looking for a loan and you’re not sure whether you’ll find this loan beneficial, the first thing that you should ask yourself is whether you’re struggling to borrow a loan or not. Do you receive constant rejections from banks? Are you having a hard time getting approval from traditional lenders? Do you suffer from a bad credit rating? If this/these are your cases, then getting a guarantor loan is ideal. Aside from the higher chance of getting approved, you can also borrow a bigger amount regardless of your credit rating.
Who Can Be The Guarantor?
As mentioned above, almost anyone can be a guarantor as long as they are not linked financially. If you’re planning to support someone and act as a guarantor, you need to be at least 21 years old and above, with an excellent credit rating, a UK homeowner or with a high income. There will be no collateral involved most of the times; however, you will be used as a safeguard against the loan. Therefore, you need to prove the lender that you are capable of supporting the loan by repaying it in case the borrower defaults.
Like regular loans, the lender will conduct a credit check. You also need to provide a proof of income, bank statements, and valid IDs. Being a guarantor is not an easy task, although your obligation is barely visible all the time. If, and only if, the borrower fails to settle the loan, that’s the time when you need to cover up the principal amount, interest rate, and other applied charges. It is quite risky especially if you don’t know your responsibilities and the consequences. Therefore, you need to assess the borrower first. Are they responsible enough to have the loan? Why did they choose to have a guarantor? Do they have a poor credit rating? Are they capable of repaying the loan? These are just some of the few questions that you should ask yourself and the borrower before signing up the loan contract.
Being a guarantor is as risky as applying for a loan. Your credit report will not be directly affected as long as the borrower repays on time, without any problem. However, the problem will be visible if the repayments are delayed and the borrower defaults. If you – as a guarantor – cannot abide by the contract and you choose to default as well, your credit report will be badly affected and if a settlement was not forthcoming, you may have a county court judgment against you. Therefore, to reduce risks on your behalf, you must limit your liability. Rather than agreeing with “All Obligations” guarantee wherein you will cover the entire debt, you must ask for a “Limited Guarantee” instead. This means that you are guaranteeing a limited or smaller amount. It is also important to receive and keep necessary documentation that are related to the signed contract. This will protect you and the borrower from any discrepancies. In addition, you may create a written agreement with the loan seeker. This should include the financial decisions and their consent allowing you to see their bank accounts.
Bank Loans Bad Credit Guarantor Loans: How To Quit Role As A Guarantor
If you’ve already signed up as a guarantor and at some point, you have a change of mind, is it still possible to get out of the situation with your credit report intact? The answer is – yes! Although it subject to critical conditions, you can still leave your role as a guarantor.
For instance, you’re charitable enough or you just can’t say no to a relative or a friend that’s why you signed up as a guarantor, but after a while you realized that it’s not a smart move and you want to quit. You’re worried about the consequences in case he/she defaults and these include a lower credit remark, CCJs, and the worse of all, difficulty in having your own loan application approved in the future. The drastic changes that will take place in just one mistake may be enough to force you to back out. So how do you opt out?
Here are four conditions that should be considered if you want to quit your role as a guarantor:
- Having An Alternative Guarantor For The Loan
One way to get out of a loan with your credit report intact is to provide a substitute guarantor for the loan. The alternative cosigner should convince the bank with his credentials; otherwise, cannot free yourself from the loan. However, if he/she possesses the same criteria that you have, then there’ll be no problem.
- Having An Additional Loan Without Your Knowledge
If the borrower applied for an additional loan on top of the original amount and you have no knowledge or consent about it, you can ask the bank to opt you out. This may free you the liability; however, you are still responsible for repaying the original amount in case the borrower defaulted.
- Remind The Borrower To Settle The Loan
If you know that the borrower can settle the loan on time, then there’s no need to quit your role as a guarantor. However, reminding him/her to repay the loan might help avoid late payments and defaults. This will somehow provide relief if you’re worried about them making a financial mistake. In case you feel that the borrower is doing otherwise and you can’t persuade them to repay the debt, then it’s time to seek help from other family members or friends.
Bank Loans Direct Lender
If you think that being a guarantor is not the wisest move or if guarantor loans are not ideal, you may choose to work with a direct lender instead. There are many private lenders online who are more than willing to offer loans, such as payday loans. The loan is accessible 24/7 and can be approved in as fast as one hour.
Direct Lender Vs Broker
Whether you want to apply for a loan using the traditional method or through its online platform, you have two options – direct lenders and loan brokers. Although both are helpful in acquiring a loan with bad credit, their method of providing cash is different.
When you choose a loan broker, you are basically dealing with a middle person. Loan brokers are professionals who are licensed and trained to help you find the right lender. Using it reduces the time and effort spent in the application process. However, since they are just the middle person, they don’t have full the control of the loan’s terms and conditions. Also, the application process may become sluggish unlike when you opt for a direct lender.
Direct lenders, on the other hand, provides the loan directly. They have full control of their own terms and conditions and may waive some fees depending on the agreement. The entire application process is done in a rapid manner and most of all, overall loan amount is cheaper because you don’t have to pay any fees, such as a commission. The downside, however, is that you need to spend time finding the right lender who will cater to your specific needs. Nevertheless, the loan offered is helpful when you are in need of quick cash.
The short-term loan is beneficial when you need to attend urgent expenses, sudden bills, or emergency costs. But since the amount is small, it cannot be used as a long-term financial solution.
Bank Loans No Guarantor For Bad Credit
One of the options you have when you have a bad credit is the payday loan. From the name itself, the loan is settled on the next payday or after 3 days, depending on the lender’s terms and conditions. Usually, the lender does not conduct any credit check; thus there’s no need to worry about your loan application even when you have a bad credit. However, like other types of loan, you need to meet the basic criteria of the lender, which includes the age, proof of residency, proof of income, and a bank account.
How Does It Work?
The amount offered by banks is generally small and can be used to tide you over the next payday. Some lenders may demand a postdated check while other loan providers can be satisfied by giving an access to your bank account. Because of the absence of credit check and collateral, the interest rate it carries is higher than regular loans. This is the lender’s way of compensating the risks from bad credit borrowers.
Payday loans are easy to acquire and it only requires a couple of requirements. Aside from the proof of income and bank account, the lender will ask the borrower to fill out an online application and once approved, the money is sent in a matter of hours.
Dangers Of Bank Loans UK And Bank Loans Instant Brought By Payday Loans
When looking for instant money, payday loans are reliable. However, the unsecured loan carries several cons that borrowers should take note of. Since it is easy to obtain, many borrowers are tempted to borrow more than what they are capable of. This may quickly lead them to a cycle of debt as the loan is expensive. Missed or late payments only mean additional charges on top of the principal amount and interest rate.
The loan is only for temporary relief, not a permanent solution. If you find yourself borrowing over and over again, maybe it’s best to consult a financial expert who can help you with your financial dilemma. Changing your lifestyle and planning your budget is ideal than relying on expensive payday loans. If you are tempted to borrow a loan, make sure that it will be used on something really important, such as an emergency case. Vacation and purchasing a new gadget should not be considered as important expenses.
Breaking The Payday Loan Cycle
If you’ve been relying on the loan for more than three times in a year, you should stop at all cost. Make sure that you have enough money to cover your food, rental, and utility expenses and once these basic necessities are taken care of; use the remaining money to break the cycle. Rather than spending your paycheck on lavish items or activities, use it to repay all your loans. Negotiate the lender and ask if they will allow you to repay in two installments. This way, it will not be too difficult.
Breaking the cycle is not easy and sometimes, it means getting another job. This may also force you to sell your items but the best way to get over it is to spend your money wisely.