Guaranteed personal loans
What are guaranteed personal loans?
When you make an application for a personal loan, lenders want to know that you will be capable of repaying that loan in full. Most lenders have a range of requirements that you have to fulfil before they will agree that you are eligible for a loan. Before you go forward with an application you should check what those eligibility requirements are. If you don't think you are eligible, or a lender tells you you're not, all is not lost. You may well be eligible if you have someone, perhaps a close friend or member of the family, who will stand as security for the loan. Guaranteed personal loans can work sometimes if you have difficulty getting a personal loan by yourself. Effectively it's a type of secured loan where the lender can be as certain as possible that the loan will be repaid if for any reason you default on it.
Why do people use guaranteed personal loans?
If you discover you don't fit the eligibility criteria to take a personal loan you may be able to get a guaranteed personal loan. Reasons for non-eligibility may include your age – you could be too young – or your level of income or poor credit history. Whatever the reason if you can find a guarantor willing to stand as security for the loan you have a much better chance of making a successful application.
The person who is going to guarantee your loan, whether family or friend, will take on the responsibility of paying back the loan if you reach a stage where you are unable to service the debt. That person needs be aware of the implications guaranteeing the loan so you both need to trust each other completely.
What are the main features of guaranteed personal loans?
When you apply for a guaranteed personal loan you must still do your research to make comparisons regarding interest rates, fees and penalties, and the length of time you can have for your repayments. The time period is likely to depend on the size of the loan, with smaller loans having less time allowed to pay them off.
The main feature of guaranteed personal loans is that lenders have someone else to secure the loan, in all probability making it more likely they will allow you to borrow. You guarantor may have to put up an asset as additional security for the lender; that could be a property, a car or something else with an appropriate value such as jewellery or a work of art.
What are the pros and cons of guaranteed personal loans?
You need to make sure that the person standing as your guarantor understands the potential risks involved should you default on your debt, and if you were unable to pay for some reason they would be able to carry on making the repayments. On the positive side, by having a guaranteed personal loan you may be offered a loan that you would otherwise not be eligible for.