People who need credit but have a bad credit history are finding it more difficult to secure financing.
Normal channels like banks are less than welcoming. Guarantor loans are an alternative and a new Web site offering these launched in the UK this week.
Even those with good credit are finding guarantor loans attractive in this environment of restricted lending.
The broker Web site Guarantor Loans Arranged made its official UK debut this week.
This site is promoted by Interfinancial Limited, an online loan broker. The company recognized the difficulty people with less than perfect credit are facing when trying to get a loan.
It decided to do something about it, offering loans of up to £5,000 to those who can offer a guarantor to back the financing.
Lenders base their lending decisions upon the status of the guarantor. That person must own a home, have a good credit history, and be employed. The credit status of the borrower is irrelevant. Even borrowers who are unemployed can qualify for a guarantor loan.
This makes it possible for someone to secure a loan to consolidate debt or purchase a large-ticket item.
The role of the guarantor is to fulfill the obligations regarding the loan if the borrower is unable to do so. A guarantor must have a trusting relationship with a borrower because otherwise this person could wind up handling the debt due to borrower default.
Someone who wants to help a relative, child, or friend financially but is not able to lend the money often serves as a guarantor.
Guarantors also help borrowers rebuild credit. When the borrower repays the loan in full according to the terms, credit history is affected positively. This may make it easier for the individual to borrow money in the future.
Alternatives available to some poor credit borrowers are unsecured and logbook loans.