Where to find guarantor loans for bad credit
At CashLady, we want to help you understand all aspects of financial lending, not just cash loans. So we’re back with another part in our series on guarantor loans. Today, we’re looking at where you can find guarantor loans for bad credit.
What is bad credit?
The term ‘bad credit’ describes an individual’s credit history when it shows that the individual has a high credit risk. Having a high credit risk indicates to financial lenders that the individual has had trouble paying back a loan before, or have defaulted on payments.
There are many reasons why you may have a bad credit profile. You may have missed a few repayments on a loan, or you have missed a few bills. In some cases, you may even have had a CCJ or IVA filed against your name. Bankruptcy can also contribute to a bad credit profile.
Sometimes, a bad credit score can be the result of not having yet built up a credit profile. Many young people find that they have poor credit scores, simply because they have not yet had the opportunity to build up a good credit history.
If you’re unaware of your current credit score, there are plenty of ways to find out what it is. The best is to use a free online tool, such as Noddle, to discover what your credit score is. This gives you some insight into whether you’ll fall into the ‘bad credit’ category.
Other credit profiling services also exist, like Experian. The benefit of using one of these services is they often have credit experts on hand to help you identify the risk factors in your credit history. This can help you possibly remove some of these risk factors, and therefore improve your credit score.
Normally, it is nearly impossible to obtain a traditional loan from a bank if you’ve got a poor credit history. However, there are lenders who specialise in helping people with bad credit obtain the finance that they need.
Bad credit guarantor loans
Guarantor loans are a great way to borrow money if you’re suffering from bad credit. When taking out a guarantor loan, someone is required to co-sign the loan with you. This person is referred to as a guarantor.
By co-signing the loan, the guarantor agrees that if the borrower becomes unable to repay the loan, the guarantor will repay it instead. This gives the lender some financial peace of mind, as they know that the loan will be repaid.
By taking out a guarantor loan, this allows people suffering from poor or bad credit to get the finance that they need without having to resort to extreme methods. Using a guarantor loan can help avoid getting a bad credit loan because you are relying on someone else’s credit score.
Anyone can be your guarantor, as long as they have a good credit history. Typically, guarantors will be close family or friends. Guarantors are not usually allowed to be spouses, although there are some exceptions.
Guarantors need to have a good credit history so that the lender knows they can trust the guarantor. The lender needs to be reassured that if the borrower is unable to pay, the guarantor will cover their financial repayments.
Using this method, the borrower can get the finance they need but also, repair their credit history at the same time. By paying their repayments on time, they can contribute to their credit score and make it better. This then allows the borrower to have a wider choice of finance options available to them, later in life.
Where can I find a guarantor loan for bad credit?
Often, the best approach to finding a guarantor loan if you’re suffering from bad credit is to go to an authorised broker or to go directly to a lender.
By going to a broker, you’ll be able to get information about the whole market. Brokers have an excellent knowledge of the marketplace and should be able to advise you on the best course of action for your situation.
If you’ve got bad credit, brokers will be able to tell you what particular guarantor loans will suit you. Many lenders will reject you if you’re suffering from bad credit, and each rejection can leave a mark on your record.
By going to a broker, they can sometimes tell you which lenders are likely to accept you before you apply. That way, you can keep the rejections to the absolute minimum. Ideally, you’ll be accepted on your first application.
Things to keep in mind
When you’re looking for a guarantor loan with bad credit, there are a few things that you should keep in mind. If you are not paying attention, you could end up in a worse financial position than you were when you started.
Guarantor loans can be secured or unsecured. If it is a secured loan, the lender has ‘secured’ the loan against your home or another valuable asset, e.g. a car. A secured loan can mean that you will pay a lower rate of interest. However, if you do not keep up the repayments, you could lose your home.
If you choose an unsecured loan, then the lender has no claim to your property. Therefore, even if you default on your payments, the lender will not be able to reclaim your home to get their money back.
Of particular note, is that you should ensure any financial lender or broker you approach are FCA-authorised. You can use the FCA register to find those who apply. Furthermore, you should consider the overall cost of borrowing. This means the cost of your loan including any arrangement fees which may be applicable to your chosen provider.
It is not always easy finding suitable finance options when you are in a difficult position. Guarantor loans can be a viable solution even if you have a poor credit history.
One of the best ways to find guarantor loans for bad credit is by using an FCA-authorized broker. Brokers have an in-depth knowledge of the marketplace and should be able to advise you on the best course of action for your situation.
Still need help? Let us know below and we can try and help you out. Alternatively, drop us a line on Facebook or Twitter and we’ll get back to you. If you need finance to help you out in a bad situation and you have poor credit, why not consider getting a loan with CashLady?