No Credit Check Loans – The Evolution of Personal Credit
Given the current financial climate, the caution being exercised by financial institutions is only to be expected. This new- found caution has proved to be bad news for anyone with a bad credit rating looking to take out a loan. The financial world never stands still though and as quickly as some financial doors close, new ones begin to open.
Previously, a poor credit rating would have led an applicant towards a secured loan, not a great option, however due to the creation of no credit check loans, this is no longer the case. Lenders are now prepared to look beyond an applicant’s credit rating by introducing other balances such as significantly increased APRs and the addition of a guarantor to the loan application. The latter of these options has proved to be revolutionary in the world of lending.
Guarantor loans represent a tremendous option for anyone with a bad credit history. A guarantor loan, which uses a third party to act as security for a loan, has the ability to boost their credit history whilst remaining available at a relatively low rate of interest.
When contemplating taking out a guarantor loan, it is worth considering the basic benefits offered by this type of loan as well as some of the forms of caution that should be exercised when repaying and dealing with problems as part of the loan.
What is a Guarantor Loan?
Whilst not a secured loan in the traditional sense of the term i.e. secured against a house or car, a guarantor loan from a company such as http://www.solution-loans.co.uk/ is technically still a type of secured loan. The security associated with a guarantor loan comes from a third party who agrees to pick up the repayments should the borrower fail to do so. The guarantor is absolutely crucial in this process.
In order for the lender to overlook the credit history of the borrower, the guarantor will be expected to have a strong credit history, a regular income and be aged between 18 and 70. In this context, the risk to the lender is significantly lowered and the borrower is then presented with the opportunity to receive a lower interest rate on the principle of their loan.
Benefits for a Borrower
The primary benefit for a borrower in applying for a guarantor loan is that they will have every chance of successfully applying for a loan. Other benefits do exist though with a significant one being the opportunity to repair a poor credit history.
Anyone who has found difficulty finding loans elsewhere as the result of previous credit card problems or past loans becomes much less of a risk for banks and lending agencies. As the guarantor assumes the risk of the loan, repayments are lowered and it is possible for the borrower to repay the principle and receive an improved credit rating. Still Exercise Caution
As with any type of loan, it is very important for both sides of the loan to fully understand the agreement into which they are entering. Generally speaking the borrower and guarantor will be very close and if payments are missed, the person acting as the guarantor needs to be able to trust that the borrower will make their repayments, unless they want their own rating to suffer, as well as becoming liable for repaying the loan.
In this context, it is often better for a guarantor to be a family member or close friend in order to avoid there being personal problems as the result of a missed payment. When it does work, however, a guarantor loan has significant benefits.