Guarantor Loans - How it Works
Find a Guarantor
Ask a person you know to become your guarantor.
It's really simple: just fill in an online application form.
Work out an instalment payment plan to suit you.
Once approved the lender will send you the money.
What is a guarantor loan?
A guarantor loan is an unsecured loan ranging from £500 to £7,500 and can last any length up to five years. The idea is that you have a second person involved in the transaction that acts as your guarantor. This person could be a family member or a friend, and if you are unable to repay your loan on time, the guarantor agrees to cover the repayment on your behalf. The interest rates for a guarantor loan are much cheaper than a payday loan, and there are no upfront admin or arrangement fees involved in the process.
Who can apply for a guarantor loan?
Anyone can apply for a guarantor loan provided that they are over 18 years of age, are living and working in the UK and have a working debit account. Guarantor loans are typically used by those individuals who have bad credit and have been denied for a loan elsewhere. But this type of loan has a very high acceptance rate because the lender has extra security knowing that someone else can cover the cost. For this reason, customers with bad credit can usually obtain much higher amounts from a guarantor loan than they can with any other loan, and it gives them the opportunity to show that they can indeed pay on time and this will help rebuild their credit rating.
How can I apply for a guarantor loan?
Applying for a guarantor loan through Quiddi Compare Compare is simple. We feature a number of responsible lenders on our comparison table. You can compare the price and terms of the loan of each company and then click on the ‘Visit Website’ button, and you will then be taken directly to the lender’s website where you can apply online. It is completely free to apply through our website, and we will not store or share your details with any other companies.
How do I receive the money?
The funds are usually sent as a same day transfer and are sent in one lump sum. In most cases, the money is paid directly to the guarantor’s debit account so they can decide whether they want to change their mind or send the money to the borrower. This method also helps prevent fraud by making the guarantor a key person in the transaction. It is essential that both parties have valid debit accounts in order to apply.
How do I repay the loan?
The repayments are made in monthly instalments, and our repayment example shown above for each lender gives you an idea of how much you will be expected to repay. The repayments are taken via direct debit from the borrower’s account. If unsuccessful, the lender will usually contact the borrow to discuss repayment, but if that individual still cannot afford it, the outstanding balance will be collected from the guarantor’s debit account. There are some lenders who also accept credit card repayments too.
If you wish to repay early, you can go a special login on the lender’s website. Depending on the company, you may have to pay up to 30 days additional interest while some other lenders like Amigo offer no early repayment fee and only charge you the daily interest that you have accumulated until that point.
About Guarantor Loans
The concept of having a guarantor to cover your loan is not new. The idea of having someone guarantee you for repayment was very common for landlords and mortgages companies but has since been replaced by credit checking systems. The original idea was that if the guarantor is able to trust you, then the lender feels that they can trust you too. By having that extra person to cover the cost reduces the risk for the lender, which means that they can grant more loans to people that need them.
The growth of the guarantor loan sector has been fuelled by the numerous payday lenders in the UK offering loans with high rates of APR that run in the thousands of percentages. Therefore, the guarantor loan has emerged as a much cheaper alternative with the APR being around 50% for the most competitive lenders. Payday loans that only last around 30 days can put pressure on one’s finances to repay the entire loan and interest in one lump sum – making them feel squeezed at the end of the month. Guarantor loans allow customers to repay in monthly instalments and for a period of up to 5 years, offering a much more long-term and flexible way to manage their finances.
In addition, there is also the bonus of a higher acceptance rate for people with bad credit. Those that are typically turned down by the bank and building societies for loans are able to get the unsecured credit that they need by having a strong person to be their guarantor. A guarantor loan lender also gives the customer with bad credit the opportunity to repay on time and repair their credit rating. This will make it easier for the individual to obtain other forms of credit in the future.
How does a guarantor loan application work?
The application for the lenders we offer is completely online. To be eligible, you must typically be over 18 years of age, living in the UK and have a working debit account. An online application takes around 5 minutes to complete, and you will be asked to enter the contact details of both the borrower and the guarantor. There will usually be a series of credit and affordability checks to assess your eligibility for the loan, and if successful, you will be sent an email with a specific link to verify your loan. To complete the final stages, the lender may require a phone call or proof of a bank statement from both parties with the aim to transfer funds on the same day.
You are still eligible for a loan if you have bad credit or have previously been bankrupt or an IVA. The lender pays specific attention to the credit rating of your selected guarantor and those that have demonstrated good credit by repaying several loans on time or being a homeowner, are more likely to be accepted.