People with poor credit ratings have very few options available when it comes to applying for loans. Lenders are making their requirements stricter for such people by the passing, which leave them with no choice but to apply for payday loans. These loans have a very high interest rate and people with all credit ratings can apply for this type of loan. But, due to high interest rate, you will be paying a lot more than what you loaned initially, which can lead to increasing the level of your debt in the long run.
However, people with low credit ratings have another option at their disposal: guarantor loans. These loans have relatively lower interest rates than payday loans, but require the borrower to have a signed consent of a guarantor. The loan is for a fixed period which can span for 1 to 5 years. There are several benefits of opting for a guarantor loan, some of the major ones are as follows.
1. Prompt Loan Approval Process
Taking out a guarantor loan is a relatively quick and easy process. You can get the guarantor loan approved and the amount in your bank account within 24 hours. The only time consuming part in the whole process is finding a guarantor with good credit rating. Once you have such a person, the lenders will check the guarantor’s financial stability and credit rating, and approve your loan right away.
2. Easily Accessible
The best thing about guarantor loans is that they are designed for people with poor credit ratings, as they find it difficult to borrow money from traditional sources. All they have to do is find a guarantor who is 21 or older, financially stable, and willing to sign the loan agreement with you. Moreover, you also have to show that you are not bankrupt, or are in a debt management program or an Individual Voluntary Arrangement (IVA). This will ensure the lender that you will make the payments on time.
3. Higher Loan Amounts
Guarantor loans allow you to borrow large amount of money because the guarantor provides the assurance that the repayment will be made in full and on time. Moreover, if the guarantor is a homeowner, then you will be able to get lower interest rate along with higher loan amount.
4. Longer Repayment Terms
The repayment terms are decided upon considering the amount of money you borrow and how much you can repay in a month. Usually, the repayment terms in guarantor loans are quite versatile, and the repayment duration can span up to 7 years. However, keep in mind that the longer you take to repay the loan, the more interest will be charged.
5. The APR Rate is Low
If you compare the APR rate of a guarantor loan with that of a payday loan, you will see a gigantic difference. This is because due to the involvement of a guarantor, the lenders offer attractive APR rates. This is one of the major benefits of guarantor loans, which appeals to most of the applicants.