Individuals with poor credit histories, credit ratings and scores, may find it a challenge to borrow money from banks and credit companies. Their circumstances may mean that their credit history, score and rating is continually deteriorating. For instance, people on benefits may be unable to get a loan in order to start a work venture. In other cases, individuals may be trying to pay off multiple loans and feeling as if they are fighting a losing battle.
Guarantor loans are designed to help people, in such circumstances, back onto a more financial stable footing. A guarantor loan, whether a long or short term loan, is backed by a guarantor – a person who guarantees, through signature, that they will meet the borrowers’ financial debt if default occurs. People who serve as guarantors are often parents, grandparents, relations or friends.
Having a guarantor makes short term lending possible for those needing small loans to bridge a financial gap, or to pay for a leisure, learning or business opportunity. Without a guarantor, many people are unable to get loans because they simply do not meet lending requirements.
Short term loans are often referred to as guarantor loans if a guarantor is used to secure the loan and provide surety for loan repayments. Defaulting on payments may lead to a poor credit history, credit score and rating that make it much harder, in future, to qualify for a loan. A guarantor loan enables payments to be made so that credit integrity may be maintained.