If you want to pay less for a payday loan, or just get a loan when you have been refused by other lenders then guarantor loans are a good option for you. They are cheaper than most non high street loans because they rely on the same principle that lending has always worked on, trust. The difference between normal loans and guarantor loans is that the trust is not just in you as the borrower but the trust someone else shows in you. They are the guarantor and it is them that will enable you to get a guarantor loan.
In summary guarantor loans involve 3 people. The borrower, the lender, and a third person who will guarantee the repayments if the borrower can not.
Guarantor loan lenders do not care about the credit worthiness of the borrower (see guarantor loans requirements) but rather the credit history of the guarantor. This is because the lender trusts in the guarantors’ good faith that the borrower will repay the loan. It’s a really good and sociable system that benefits everyone concerned. Because the borrower’s credit history is not relevant they can get a guarantor loan when other lenders would have turned them down.
Guarantor Loan Lenders
There are a few guarantor loan lenders in the UK and most will lend anything up to £5000 either including or with an additional top up loan of £2000 which is released after an initial period of meeting repayments on time. The usual APR is between 40% and 60% with repayment periods up to 5 years.
One of the really interesting developments in guarantor loans has been the emergence of payday guarantor loans. By reducing the guarantor requirements (for example removing the need for the guarantor to be a home owner) and slightly increasing the APR accordingly guarantor loans have been able to target the payday loans market at literally one tenth of the APR. A typical APR for a payday guarantor loan is 199%, this compares with an typical APR of 2000% or more for a payday loan. This clearly illustrates the flexibility of the guarantor loan and one can only imagine we will see more lenders offer the product in the future.