We recently wrote here on the CashCompare blog on the subject of “no guarantor loans”, and how they can be useful for some people who are on the lookout for a short-term injection of funds. Sure enough, as a broker, we maintain connections with various no guarantor no guarantor loan lenders, which could assist you in exploring potential loan terms.
There are advantages and disadvantages of agreeing to have a guarantor on your loan – or indeed, deciding against having a guarantor. So, for this blog post, we’re focusing specifically on the situation if you do decide to have a guarantor attached to your loan agreement.
In case you’re new here, let’s cover the matter of what a guarantor actually is. The term indicates someone who “guarantees” something, although Cambridge Dictionary is more specific, defining it as “a person or organisation that promises to pay back a loan if the person or organisation that borrowed it cannot pay it back.”
And that’s very much what a guarantor on a short term loan is; someone who “guarantees” the loan by promising to repay the debt, in the event that the person who took out the loan is unable to do so.
There is a big difference, of course, between who theoretically could act as your guarantor on your short-term loan, and who would make a very suitable guarantor.
But let’s tackle the first of those questions first. Many people can potentially act as a guarantor, but there are specific criteria they might need to meet, although the specific lender involved may have certain expectations – for example, that the guarantor is over 21 years of age, and is a family member or friend of the person taking out the loan.
Lenders also frequently require the guarantor to be a homeowner, and/or to have had credit previously. And of course, it will be expected that the guarantor will have financial stability and good credit history.
Those factors might already narrow down the possibilities for who could act as your guarantor, as does the fact that you can’t normally have someone who is financially connected to you serve in this role. So, you can probably rule out your spouse or partner, too.
After you have accounted for all those factors, there might be just a few people left who could make a suitable candidate for a guarantor. In practice, the guarantor on your next loan might end up being one of your parents or a family friend, although you may also have someone else in mind.
Before making any borrowing decisions based on this information, we recommend you seek independent financial advice or consider other sources of information to ensure you make an informed choice.
So, let’s cycle back to the question of who might represent a suitable guarantor on your next short-term loan, once the aforementioned factors have been considered.
The biggest element here, will be trust. The guarantor that you choose will need to be someone who you have a trusting relationship with, and who you feel comfortable openly discussing your finances with. That might mean your guarantor is ultimately a parent, sibling, or even colleague.
But as we referenced in our previous blog post on no-guarantor loans, not everyone is able to easily find an appropriate guarantor, or they might simply prefer not to have a guarantor attached to the loan.
They might be fearful, for instance, of a future situation in which the guarantor needs to step in to repay the loan, and the relationship between the guarantor and the lender becomes strained (or even broken) as a result.
So, here at CashCompare, we can certainly understand why someone might decide against having a guarantor on their loan at all, even if they theoretically could have one. It’s one more reason why we maintain connections between multiple no guarantor loan lenders, to help give would-be borrowers more options.
To find out more about what those options could be, why not complete and submit our no-obligation loan request form today? Please note that submitting the form may involve a soft credit check, which doesn’t affect your credit score.
"Warning: Late repayment can cause you serious money problems. Always consider if borrowing is the right option for you and ensure you can repay your loan." For help, go to moneyhelper.org.uk.