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Do I need a guarantor for a short-term loan?

do-i-need-a-guarantor-to-get-a-short-term-loan

Do I need a guarantor for a short-term loan?

Most short-term loans, including doorstep loans, don’t require a guarantor.

For those with a poor credit history, or those looking for a larger value than those offered by most short-term lenders, it’s worth considering if a guarantor loan is a better option for you.

What is a guarantor?

In terms of a loan application, a guarantor is an individual who agrees to repay the debt if the applicant is unable to make the payments and defaults on the loan [1]. Doing this adds an extra level of security for the lender. This is because if the original applicant can’t ultimately repay the loan, there is another person who they can ask to.

The terms and conditions of a guarantor loan differ from lender to lender, so what the guarantor should cover financially may not be the same for everyone. However, in general, a guarantor loan could be an option for someone with a poor credit history who has a relative or close friend who trusts them to make the repayments and is financially able to pay off the debt if they can’t.

Who are guarantor loans for?

Typically, a guarantor loan is for a higher value than a short-term loan. For those who require a larger sum of money but who are generally turned away by traditional lenders such as banks and building societies, a guarantor loan could be a solution.

To apply for a guarantor loan, the chosen guarantor will need to meet certain requirements before the application is approved. These will differ between lenders, but typically the guarantor should have a strong credit history; a steady, permanent income; be a homeowner [2] (although not always necessary), and have had a long relationship with the applicant.

What are the alternatives to a guarantor loan?

There are lots of other loans available as an alternative to a guarantor loan. Short-term loans, including payday and doorstep loans, won’t require the applicant to have a guarantor. It’s important to remember that these short-term loans are typically low in value, so may not be suitable for those looking to borrow a large sum.

For those who require a larger loan, a traditional lender could be an option if you have a strong credit history. If you’re not sure what type of loan will work best for your circumstances, consider speaking to a financial advisor or a charity like Citizens Advice before you apply for a loan. Each application you make is shown on  your credit report, which could impact your ability to obtain credit  in the future.

 

 [1] Sourced from UK Credit - Guarantor FAQs. Retrieved Feb 9th, 2018.

 [2] Sourced from My Credit Monitor – Understanding guarantor loans. Retrieved Feb 9th, 2018.

 

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