Why Guarantor Loans Are A Better Option Compared to Payday Loans

Payday loans have justifiably come under increasing fire in the press over the past few years. With a reputation for reckless lending and preying are people with limited options, it does not take long to work out why. Better options do exist though.

There was a time not so long ago, where, if you needed to obtain credit, you basically just needed to walk into a bank and ask. However, this is no longer the case, and this is one of the primary reasons that payday loans have come to the fore due to the fact that a significant number of loan applicants are now unable to tick all the required boxes in order to become eligible for a bank loan.

For more information on why payday loans are dangerous, please check out the following Guardian article - http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11177428/Four-in-ten-borrowers-get-a-payday-loan-even-if-one-lender-rejects-them.html

Reducing Risks To Lenders

As things became worse in the economy, financial organisations throughout the world began to view unsecured loans as too much of a risk and therefore people who would have been welcomed in the past, are now left with very few options in regards to obtaining further credit.

If you are in a position where you have either limited or no credit history, or if you have a very poor credit rating, being able to successfully apply for a loan has become virtually impossible.

There are a variety of factors which can negatively impact your credit score, including:

Have you have picked up some any County Court Judgements (CCJs)?
Have your loan or mortgage repayments fallen into arrears?
Have you missed any credit card/store card payments, a chequered employment history (have you regularly changed jobs?)
Are you currently on the electoral roll?

All of these get recorded in your credit history and play a crucial role in determining the success or failure of an application for credit.

However, if any of this applies to you, all is not lost. Many lenders are now offering a new form of loan which has been designed to help people in this situation obtain credit. This loan is called a ‘Guarantor Loan’ and is available from lenders including http://www.solution-loans.co.uk/.

What is a Guarantor Loan?

A guarantor loan is a loan made available to an applicant who is in a position to offer details of someone who is willing and able to stand as a guarantor for the applicant’s loan.

The role of the loan's guarantor is to undertake a binding promise to the lender that they will repay the loan if the applicant defaults on any payments or is unable to repay the loan in full.

Because the guarantor provides a complete level of protection to the lender, the risk to the loan is substantially reduced and therefore the lender does not have to take into consideration the credit history of the applicant, instead relying on the suitability and credit history of the loan’s guarantor.

What Else Do You Need To Know?

It is the responsibility of both the loan’s applicant and guarantor to ensure that they are fully educated in all aspects of the guarantor loan process and what exactly they have signed up for.

It is crucially important that a clear understanding exists between the applicant and the guarantor when taking out a guarantor loan, such as those available from http://www.solution-loans.co.uk/ to ensure that both parties are clear on what their future responsibilities and commitments are to avoid any potential problems further down the line.

It is important to remember though, that as long as you maintain the loan repayments, the lender will never need to contact the guarantor as they are basically there to act as a safety net for the repayment of your loan.

For more information relating to the current alternatives to payday loans, please take a moment to visit my Web Garden account.

The following video explores the dangers associated with payday loans in greater detail.

Money As Debt - Full Length Documentary - YouTube