Don’t be fooled by the fancy name, because this is not a new financing solution, as some may claim, being an old one but in a new presentation. The way these loans work is that they allow persons that would have a poor credit score to get the loan they want, after all, with one condition. The condition is to get a guarantor for their loan. So the guarantor loans are the solution for those cases in which the bank considers you ineligible for a loan, the guarantor being their backup plan. Even if everything looks rather straightforward, there are some myths that revolve around this type of loan.
One myth would be that the interest rate on such a loan is skyrocketing. Well, this is not entirely accurate, as there are other financial solutions that exceed the interest rate of the guarantor loan. All you have to do is check your offer and see which one has the lowest interest rate. Usually, a loan with guarantor should be around 40 to 50%. Another misconception is that these loans only allow small sums to be borrowed. Again, it is not true, because recently, the guarantor loans can offer up to £10,000. It is true that a few year ago the limit was only half of what it is today, but things changed in time. You may also find it hard to get a guarantor, as they believe that the history of the loan will appear in their file. Do explain to them that this is not true at all, as the loan is made in the borrower’s name. Only in the case he refuses to pay, the guarantor doing the same thing, only then it will become visible in the guarantor’s file.
In the group of myths concerning guarantor loans is the one stating that the guarantor must present his bank details. This is again not true, although it may depend on the lender. Some lender will require these details, while some will not, so it is good getting all the details straight out from the beginning. So you see, you need to do some research and have an earnest conversation with the lender if you want to find out all the details because many things you may believe can be completely wrong. Weigh all your options and choose what is best for you.