Beginner’s Guide to Guarantor Loans
Maybe it’s your first time applying for a guarantor loan. Maybe you haven’t heard of it before and were only referred by a friend seeing that you have bad credit. Either way, this is your beginner’s guide to guarantor loans. Included in this guide is all the information that you’ll need to know about guarantor loans like loan term, loan amount, cost and requirements among other things.
What is a guarantor loan?
A guarantor loan, as the name suggests, is an unsecured personal loan that requires a guarantor to back a borrower’s loan application. You guarantor can be anyone including a family member, friend or even a colleague provided that he or she is not linked to you financially. The guarantor must co-sign the debt agreement where he or she agrees to shoulder the repayment and the consequences in the event that the borrower breaches the terms and conditions.
How much and how long?
With guarantor loans, you can borrow between £500 and £7,500 at repayment terms from 12 months to 36 months. As the borrower, you can set your own amount and term according to your needs and what you can afford for a monthly repayment fee. In general, repayment method is set-up as an auto debit from your bank account to avoid late or missed repayments.
What are the requirements?
If you’re applying for a guarantor loan, both the borrower and the guarantor have specific requirements to meet.
For the borrower, he or she must meet the following:
- Should be of legal age - at least 18 years old
- Should be a UK resident
- Should have a bank account in the UK
For the guarantor, below are the requirements:
- Should be 21 years old or older
- Should be a homeowner or a mortgage payer
- Should have good credit rating
- Should be able to provide proof of steady income
What is the interest rate?
The average representative APR or annual percentage rate for guarantor loans is 50%. It may be fixed or variable depending on your lender. Fixed APR means that your interest rate is fixed throughout the duration of your loan. Variable APR, on one hand, means that the base interest rate may vary from time to time. It could be higher or lower. Either way, it will affect the overall cost of the loan.