Although we would like to believe that the financial situation within the United Kingdom is improving, this is simply not true. While recovery has happened since the financial crisis of 2008, the Brexit vote and with it, leaving the European Union in the near future, means that financially, even forecasters are uncertain how things will turn out.
But what does this mean to the man in the street? Where does it leave an already under strain public? Well, certainly in our view, things are going to get far tougher before they get any better. And that means one thing only. People are going to use more and more credit products to get by as not many have disposable income or savings anymore.
We can see it across the country already. In fact, many loan products are being accessed more and more, including tenant guarantor loans. But what exactly is this type of loan? How does it work? How do you apply for one? Well, in this article we will be taking a closer look, discovering the ins and outs of the tenant guarantor loan.
What is it?
Simply put, a tenant guarantor loan is an unsecured credit product offered by a number of companies across the United Kingdom. It is particularly aimed at members of the public who have a bad credit history, ccj’s against their name or even in some cases, been declared bankrupt. Over the past number of years, these have become a very popular way to lend money for this selected group.
There are a few requirements, however. When applying for a tenant guarantor loan you will need a second party to co-sign the loan with you. This person is your guarantor and by signing the loan with you, they have agreed to pay the instalments should you miss a payment(s). Of course, a lender is more than susceptible to give a loan in this situation because the guarantor acts as a security buffer.
In most cases, a tenant guarantor loan is used in a time of emergency when an unexpected expense arises which a person has no other way to pay off. By taking out a tenant guarantor loan, they can raise enough money to see off that expense, be it an unexpected medical bill, a death in the family or something similar.
Lately, however, people who have bad credit ratings have discovered a clever use for these loans. Along with other similar bad credit loan types, for instance, a logbook loan, people who pay their instalments each month and eventually finish paying off a loan over its terms can help improve their credit score no end. By doing so, you can finally put yourself in a position where your credit score becomes positive and you will have other lending options from banks and other financial institutions. You may also have access to things such as a mobile phone contract, something you would be turned down for if you had a bad credit rating.
A guarantor – who should I ask?
Now onto the tricky bit. At CCLF Loans, we offer many people advice about a range of loan options. When it comes to guarantor tenant loans, the first question we always get asked is ‘Who should be my guarantor?’
Why? Well, people are embarrassed to approach someone to ask them to co-sign on a loan, even if it is a close family member. At the end of the day, our advice is to find someone you know will sign for you, has the financial means to help if you default on a payment (you don’t want them to lose out if you default) and who will agree to act as guarantor on your behalf. Your guarantor should also not suffer from a bad credit rating. If they do, the loan will not be approved. Finally, bear in mind that the person who agrees to sign as a guarantor for you must be younger than 65.
Advantage of this type of loan
A guarantor tenant loan has a number of advantages for the individual applying for one.
- As we have already mentioned, many people are in serious financial difficulty. When they need to apply for a loan for a large sum of money, their credit rating can be their downfall. With a guarantor tenant loan, even if you have a bad credit rating or ccj’s against your name, this will not affect your chances of securing a loan.
- A guarantor credit loan is far more competitive in terms of an annual percentage rate than a payday loan, another popular loan the public of the United Kingdom favour.
- Unlike a logbook loan that uses your vehicle, motorbike, truck or caravan as a form of collateral, a guarantor tenant loan needs no such thing. Bear in mind however, that should you default, the guarantor who signed the loan with you will have to make a payment for that month’s instalment. It is for this reason that we suggest a family member, as you are more likely to not default and make a family member pay in your stead. Well, mostly!
- Once you have the person who will stand as a guarantor for you, the actual signing up process and administration to set up the loan is quick and painless. Many institutions that offer this type of loan promise to have it in bank accounts within a day.
- As mentioned briefly above, you can use a tenant guarantor loan in your favour to build up a poor credit history into a positive one or to even help build a credit history when just starting out in the working world.