Reduced income, unemployment, poor financial management, and unexpected expenses are few reasons why people end up with bad credit score. Due to this, banks and other traditional lending institutions turn down loan applications, assuming that the borrower won’t be able to make timely payments. For such people, bad credit loans have been designed to help them cope with their financial needs and get in a better financial position in order to improve their credit score.
Some people also find it difficult to get loan because they never borrowed money before due to which it becomes hard for lenders to assess their ability to pay back loans on time. So if you have a bad credit score for any reason whatsoever, you can opt for guarantor loans to cater to your financial needs. Qualifying for these loans is quite easy as all you need is an eligible person who can act as a guarantor for your loan, and the lender will transfer the loan amount to your bank account within a few hours of approval.
Effect of an Adverse Credit Score on Guarantor Loan
Typically, guarantor loans are made for people with bad credit score. So if you are a loan applicant, you don’t have to worry about your adverse credit score, as it will not have any effect on your guarantor loan. However, if you are entered an Individual Voluntary Management Plan, are currently in a Debt Management Plan, or have declared bankruptcy, then you cannot apply for a guarantor loan.
The lenders look at the credit ratings of your guarantor. It is necessary for your guarantor to have a good credit rating and payment history, so that if you fail to pay your debt on time, they can turn to the guarantor for payment.
Criteria for Guarantor Loans
The lenders that provide guarantor loans know that the past credit history is not the reflection of your current financial situation. They understand that people require loans to get back on track and improve their credit score. That is why they approve your loan application based on the guarantee of the person who understands your situation. There are a few things that you will need before you can have the money transferred to your account.
First, you must be eligible for guarantor loan as per lender’s affordability criteria. This means that you must have a regular monthly income along with a certain amount that you can use to make the monthly loan payments. Second, you must have a bank account. Lastly, you must lie within the legal age limit set by the lender. The minimum age is 18 years while the maximum age is 75 years, but it may vary from lender to lender.
Benefits of Guarantor Loans
If you go to a mainstream lender, your loan application will be rejected right away for having a bad credit score. But with guarantor loans, you have the advantage of borrowing money with bad credit rating. As long as you have an eligible guarantor and are capable of making monthly payments, you will be able to get the loan. Another great benefit is that you can have the money in your account within a day.