Is a Guarantor Loan the Best Choice if you have a Poor Credit Score?

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.

What 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.

How 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.

Is 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.

How to get a Loan with a Bad Credit History

If you have a bad credit history then you might think that it will be impossible for you to get any type of loan. Luckily this is not actually the case, although you will not find it as easy as those with a good credit history and you may end up paying more. It is good to look at the options though as you could find something that will suit your needs.

Standard borrowing
Although standard loans will have credit checks, it does not mean that you will always be eliminated due to your credit score. Some lenders will still let you have a loan perhaps if you put down some collateral (such as borrowing against a house or vehicle that you own) or they may let you have a loan at a higher than advertised price. This could make a loan risky or expensive, but they are options that could be worth considering if they are offered to you. You should look at all options.

Bad credit borrowing
There are some loans that are available purely for those who have a poor credit record. They tend not to do credit checks but as they are taking on a risk, they will tend to charge more than standard loans. Examples of these types of loans are payday loans and guarantor loans. A payday loan is a very short-term loan that has to be repaid on the day you get paid. A guarantor loan allows you to borrow larger amounts for a longer time but you need to nominate someone as a guarantor who will cover any repayments that you miss.

Borrowing from friends or family
You may prefer to borrow money from family and friends. This could be easier and cheaper but it will depend on you having friends and family members that will be willing to lend you money. This is not always the case for everyone. You will also have to sort out your own repayment terms with them and see what they want to charge with regards to interest.

Choosing the right loan
It is not easy to get a loan and there are not really that many options available. It is worth thinking about whether you really need the loan at all as it could end up costing you a lot of money. It could be much better to think about ways that you can improve your credit score so that you can get a better deal on a loan when you need one. In order to do this the best start is to check that your credit record is correct. If it is then you should be able to identify which items on it are causing problems, such as late payments on bills or outstanding debt. Then if you ensure you start paying bills on time and repaying debt then you can improve the score.

If you have no choice but to take out a loan right away then you will need to pick between your options and find the best one. This can be difficult as most of the options will be expensive but one of the best things to look at is how well you will manage the repayments. With all loans you will be expected to repay and so you need to look at the repayment schedule and see whether it is something that you think you will be able to handle. Do not just guess, but look at your bank statements for the last few months and you will be able to see how much money you normally have available to you and how much you spend. This will allow you to see how much you can afford to repay on a normal month and will allow you to make a sensible decision about which loan you can take out. It is all too easy to focus on the interest rate or how much money you can borrow without thinking about the consequences of that borrowing. Without thinking about how you will be able to afford the loan then you should not be considering it at all. If you are confident that you can afford the repayments, then you can start comparing the costs of the loan and how much you can borrow in order to see which will be the best for you. If you cannot afford the loan then you will need to think about an alternative. This might be that you will need to go without the item you were going to buy with the loan, that you might have to wait and save up for it or that you may need to reduce your other spending to cover the cost of it. You could also look for ways to earn more so that you can make more money.

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