Bag Of Pound NotesThe guarantor loan is the latest answer in the UK for consumers to actually being able to borrow some money at affordable rates.

This post explores the guarantor loan in a little more detail.

Historical Overview Of Guarantor Loans UK

Once upon a time, it was relatively easy to walk into a local bank and borrow several thousand pounds. Assuming an acceptable level and length of prior credit history, the borrower’s signature was the only “collateral” required. During recent years, however, this scenario has become rarer than the proverbial hen’s teeth. The combined effects of various complex factors and phenomena within global money markets and national economies have converged to bring about a drastically altered landscape on UK’s banking scene.

Like its counterparts in other countries across world, Bank of England has increased interest rates on funds lent to institutional borrowers such as banks and credit unions throughout the UK.

Consequently, as for-profit businesses, financial institutions have had to adjust their own lending policies accordingly. The first item on their agenda has been increasing interest rates for consumer loans. A close secondary priority is stiffening eligibility criteria that borrowers must meet in order to qualify. The net result of this industry-wide paradigm shift has been increased cost and difficulty obtaining a decreased number of available loans. Indeed, due to the extreme severity of the current credit crunch, even drastic lending policy overhauls have failed to save some financial institutions.

A prime example is Regent Centre-based Northern Rock. Just seven years ago, Northern Rock would eagerly lend as much as £5,000 for as long as three years at an interest rate of just 5.9%. Less than one year later, Northern Rock joined the ranks of its insolvent colleagues and is now a defunct institution. In an effort to avoid following suit, most High Street banks that still struggle to hang around and ride out the credit crisis’s wrath have made it even harder to qualify for even more expensive loans of increasingly-lower amounts.

Enter UK Guarantor Loans ….

Fortunately, a new financial services industry niche has recently emerged and portends as the ideal resolution to this widespread dilemma.

What Is A Guarantor Loan?

Shaking HandsAs the title implies, the basic structure of this novel financial product is a loan with a guarantor. Borrowers usually recruit friends or family members to serve as loan guarantors to provide lender reassurance of prompt repayment by agreeing to assume the debt if the primary borrower defaults. Due to this indispensable element, guarantor loans UK for bad credit are available to credit-impaired consumers who are otherwise unable to obtain funds via conventional banks and credit unions.

Read The Independants’ Article: “Consumer Rights: A guarantor can be a friend indeed if you can’t get credit”

What Qualifications Does A Loan Guarantor Have?

While specific eligibility criteria vary slightly among lenders that make guarantorloans, the basic universal requirements are: 1) a substantial level of steady income; 2) an ability to afford full repayment on initial loan terms; and, 3) no recent adverse credit history. Although many lenders also require home ownership, no lien is placed against the guarantor’s property.

See the following video which examines some of the risks of being a loan guarantor:

What Qualifications Must Borrowers Meet?

Prior credit history is not a factor in gaining loan approval for guarantor loans bad credit. Instead, lenders focus on the applicant’s 1) ability to repay; and, 2) loan guarantor. As long as the prospective borrower has sufficient income to maintain monthly instalments, a qualified guarantor, and no pending bankruptcy or IVA, approval is almost certain.

Many Great Advantages

African Family PhotoPrimary benefits to would-be borrowers boil down to two words: “availability” and “speed.” In a purely lexis sense, both terms have simplistic and relatively narrow connotations. In the guarantor lending context, however, they represent immensely positive far-reaching impacts and long-term implications. Indeed, their practical effects are so enormous as to literally mean thriving in a state of prosperity or perishing in a great disparity of capital deficiency.

Besides being a lifeline to otherwise-unavailable funds for credit-impaired UK consumers, borrowers with solid financial backgrounds and impeccable credit can also reap rich rewards. Traditional bank loans have lengthy processing times and typically require collateral. This means that prime borrowers must tie up existing assets in exchange for the privilege of a lengthy wait to receive funds they needed yesterday.

A same day guarantor loan is the perfect solution that solves many problems all at once. Like the label suggests, borrowers have access to liquid capital as initial application and loan proceeds disbursal occur on the very same day! Meanwhile, they retain non-encumbered title to their homes and auto-mobiles.

If you are a credit-impaired borrower currently on the rebound from prior financial setback, these innovative loan products help improve your credit rating as timely repayment occurs. This beneficial aspect greatly expedites your economic recovery efforts.

Below are two case studies that illustrate the positive effects of UK guarantor loans in practical terms.

Case study 1: Jon Raises £5,000 to Help His Electronic Equipment Installation / Repair Firm

Jon Bakers FamilyJon Barker is an ambitious, high-achieving, hard-working entrepreneur who owns a successful home business. Some time ago, the fruits of his labours and sustained efforts began manifesting in the ever-growing forms of expansion and profitability of his electronic equipment installation/repair firm. However, those same well-deserved and desirable results presented a huge problem for Jon. His company’s growth at such a large and rapid extent demanded correspondingly increased expenditures for outsourced service fees and advertising. The consequences of failure to meet that demand were equally ubiquitous as the positive factors that created them – bankruptcy and financial ruination.

These coinciding circumstances placed the 27-year-old Norwich resident in a cruel quandary. Jon’s credit rating and assets were woefully insufficient to meet the current ultra-stringent qualifications required to secure a small business loan through conventional funding sources such as banks.

Luckily, he learned about UK guarantor loans in the nick of time. Because Jon’s 65-year-old mother Brenda believed in her son and wanted him to continue succeeding and making her a proud mum, she agreed to underwrite a £5,000 guarantor loan. Her calculated decision inspired by material concern proved quite prudent. It provided the quick capital infusion and only solution to save Jon’s fledgling concern. Thanks to the white knight guarantor loan company that advanced the funds, Jon’s company has steadily grown ever since.


Final Comparative Analysis

Signing ContractLogbook and payday loans are two popular options that offer relief for cash-strapped consumers. Although both offer quick access to desperately needed funds, interest rates are exorbitant by comparison. Besides that, payday loan borrowers must repay all advanced funds by their next payday. This brief window of time frequently offsets any benefit of easy availability. In the latter scenario, lenders retain title to the debtor’s automobile and may thus assume title to an asset that may be worth far more than outstanding loan balance.

A guarantor loan borrower gets to bypass all these detours in the quest for funding by providing the perfect means of escape from overwhelming budgetary burdens at cost that won’t break their back.

If you would like to find out more about Guarantor Loans check out which has lots of really useful and interesting articles.