If you have a poor credit score and want to get a loan you may have very little choice. Lenders tend to want to do a credit check and make sure that you are able to repay the loan and so will turn down anyone that they feel are too much of a risk. However, there are some loans that are set up for those people who have a poor credit score and are therefore worth looking at if you need to borrow some money. One of these loan types is a guarantor loan and you may feel that it sounds like you best choice. It is good to understand how the loan works and how it compares to others so that you can tell if it really is the best choice for you.
is a guarantor loan?
A guarantor loan will allow you to borrow thousands of pounds even if you have a poor credit record. This is because you will nominate a guarantor who has a good credit record who will cover any repayments that you are not able to afford. This means that you will need to find someone who is willing to help you out like this and willing to cover those payments that you cannot afford. It could be that you have friends or family members that you feel will be able to do this for you.
This sort of loan can still be quite expensive. This is because the lender is still taking a risk as if you cannot cover the repayment then they have to go through the process of taking the money from elsewhere which will obviously cost them. It can be cheaper than other forms of borrowing and you can borrow up to around £10,000 which is a significant chunk of money.
does it compare to other loans?
It can be expensive compared to standard loans but if you have a poor credit record then you will not have access to these anyway. The other main option for someone with a low credit score would be a payday loan. These only allow you to borrow up to £1,000 so if you need a large sum of money would not be enough. You also have to repay them on your next pay day so you only have the money for a few weeks, which may not be long enough. You will need to find a guarantor though, something you do not need to do for a payday loan. There will be some people that will not be able to find someone that can be a guarantor for them. This will mean that this loan will not be suitable for them.
it the right choice for me?
It is worth thinking about the costs of the loan and the repayments as well as the benefits of the loan. It can be easy to focus on the money that you will get and what you will do with that money but you need to make sure that you will be able to repay it. This can seem really boring, but if you end up really struggling then it will not be much fun either. Obviously, with the guarantor loan, you will not have to make the repayments as your guarantor will make them if you are short of money. However, it is likely that you will want to be sure to make as many repayments as you can because you will not want to leave it to your guarantor to repay those for you. It could be a problem if you do as the guarantor may expect the money back or they may never expect to have to make a repayment. It could make them short of money and this could lead to them feeling cross with you because they have ended up like this. It could mean that they struggle to pay all of their bills and this could lead to them getting into financial trouble. This could make them resent you and could make you feel guilty and so it could end up with being a very tricky situation. You have to decide whether you are willing to risk your relationship with them like this.
However, the alternatives may not be much better and so you can find yourself in a really tricky situation. Make sure that you are really sure that you need the loan. If you can manage without it then it would be really sensible to do so. Think about whether there are any alternatives to borrowing the money that might be better. If you do need the loan make sure that you are really careful with your spending and that you earn as much as possible so that you are in a really good position to be able to afford the repayments.