How A Guarantor Loan Can Help Move Your Finances Forward

Getting a bank loan is by no means a certainty, and for those with a chequered borrowing history, it can be nearly impossible to secure a personal loan. Whether it’s a mortgage for a new home, or a personal loan for a car or a business venture, your chances of successfully securing funding are severely reduced by a negative credit record.

A guarantor loan can help you secure the funding you need, while also putting your finances back on track for a more successful, more prosperous future. But what is a guarantor loan, how do they work, and how can they help someone in your situation?

Guarantor Loans Explained

Guarantor loans provide the missing link for banks and lenders unsure about lending to a particular borrower. The threat of default is one that banks and lenders avoid like the plague, because one default can have an enormous effect on the portfolio. A guarantor is someone with a better credit history than you, and with a demonstrable means of income to support your obligation should you default. Often a parent or partner, the guarantor essentially underwrites your obligation, stepping in to meet the repayment in situations where the borrower defaults.

Why This Is Good For Lenders

Lenders like to know they have the bases covered, and if they have at least one creditworthy name attached to an application, they will feel much more confident at being able to recoup the loan amount if necessary. Of course, you need to find someone who trusts you more than your credit rating suggests to back up your loan, and they need to preferably meet the lenders terms to qualify. They may also be asked to provide additional security, but this will boil down to the individual lender and their particular requirements.

Improving Your Credit Score

For those with a bad credit history, a guarantor loan can make it possible to improve your credit score and build a brighter financial future. Once you have secured the loan, repayments will build your own credit rating, even with a guarantor in place. If you can demonstrate responsible credit management under a guarantor loan, you are much more likely to secure further borrowings on better terms, with a stronger credit score into the future.

Guarantor loans are a great product for individuals in applicable circumstances. Provided you can find a guarantor who is willing to take the heat if you default (and provided you don’t then subsequently mishandle your guarantor loan), you will steadily begin to rebuild your credit rating for future borrowing. For more tips on building your credit score, visit ukhomeandpersonalloans.co.uk for loans with guarantor.