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Year: 2019

Guarantor on a Personal Loan? 5 Risks You Need To Know About

Guarantor loans are highly sought after with fewer people having perfect credit. Unfortunately, a lot of lenders aren’t willing to take a risk on borrowers and that does call for guarantors. It’s frustrating because the borrower has every intention (and the ability) to repay the loan but the lender doesn’t see it that way, they only see the risk. That’s why there are so many in need of a guarantor loan. However, whether you’re happy to be a guarantor for someone you know, it’s still important to understand the risks associated with the loans.

You Accidentally Become a Co-Borrower Rather Than a Guarantor

While you might believe there’s no way an error could occur during the paperwork of the loan, think again. There have been occasions where a guarantor has been named as a co-borrower and that’s very different from a guarantor. Unfortunately, sometimes the problem lies in the small print; while other times it’s down to issues with the lender and the filling out of the loan application. It’s vital to know the risk so that you can hopefully avoid it! Loans with a guarantor may be risky for the guarantor more so than the actual borrower.

Your Credit Gets Ruined

Depending on what happens with the progression of the loan, and its repayments, there’s every possibility your credit could get ruined. How is that if the guarantor doesn’t get the money? Your name is associated with the loan and since you’ve guaranteed the loan will be repaid back, it’s on your head and your credit report! Guarantor loans are simple enough to apply for, but guarantors can often get the short end of the stick!

You’re stuck with Repayments after a Default

Let’s say your friend takes out three thousand dollars but after a few months they default on the loan and stop paying. When the borrower defaults, the guarantor is the one the lender’s going after. Why is that if they didn’t get any money? The guarantor signed onto guarantee payment and that means they’re liable for the repayment. Loans with a guarantor have risks like that, and it’s something which far too many guarantors aren’t aware of.

It’s Harder to Get Future Loan

Did you know it’s a lot tougher to be eligible for a loan in the future? Guarantor loans have that risk and it’s deeply frustrating when it prevents you getting a loan later on. If you wanted to get a loan you might have to go to a specialist lender instead of a standard lender. You might even need a guarantor! That’s a risk you have to know about when you plan to be a guarantor. See more.

You Have Fall Out With Friend

Let’s be honest, for the first couple of weeks, you don’t think twice about the loan but after a little while you start to get a few doubts creeping into your system. When the doubts creep in, you will probably badger your friends about the payment and that will lead to a fall out. Do you really want to fall out with your friend? You of course, do not want to fall out with the friend but it does happen, all because of the loan. When it comes to loans with a guarantor, there are risks with losing friends. You don’t want it but it’s a possibility.

Know the Risks

Acting as a guarantor can be a wonderful thing to do for a friend, and there may be many times when things go smoothly and without any issue. However, things don’t always go perfectly and that’s when things get out of control. You never can tell how a loan will progress or the friendship put at risk. That’s why you need to know about the risks so that you can make a careful decision about whether you’re happy to be a guarantor on guarantor loans.


Are Lending Clubs Better Than Banks

In recent times, there has been an alternative to traditional institutions like banks and credit unions. One of these alternatives is peer to peer lending platforms such as lending club and prosper work. This type of platform is particularly beneficial to those individuals with bad credit and may be unable to approach the bank for a loan. In this article, we would be looking at the main difference between lending clubs and banks especially as it relates to those with bad credit issues so that you can choose which one is right for you.

Banks

There are two types of loan that can be obtained from banks: secured and unsecured loan. An unsecured loan is usually for small borrowers, in this case, a fixed sum is given to the borrower and the loan is paid back over an agreed term, typically up to five years. The interest rate is fixed once the loan agreement has been signed. On the other hand, a secured loan is usually for larger for larger amounts. This is the reason it is usually secured to an asset. Secured loans are also payable over a fixed period of time and at a fixed interest rate. The main difference between a secured and unsecured loan is that you stand to lose your ‘asset’ if you fail to make repayments.

Lending Clubs

In some ways, lending clubs are not all that different from a bank. This is because you can borrow a fixed amount of money over a fixed term and at a fixed interest rate. However, unlike banks the money from lending clubs from your peers. Lending clubs have fewer overheads; this allows them to offer better terms and lower interest rates. This is a better deal for lenders as they will be able to enjoy better interest rates and tax-free interest if you decide to move your earnings into an Innovative Finance ISA. For those with bad credit issues, this can be a solid option. Learn more.

Lending Clubs vs. Bank Loans

In a lot of ways, lending clubs are better than bank loans. This is because they are more flexible and also offer better rates. For instance, lending clubs allow you to make overpayments or pay off the balance of your loan early; this allows you to save on interest. This is not the case with secured and unsecured loans in most instances. Payments are usually fixed and although you are allowed to pay back your loan early, you may have to pay a penalty in the form of interest. This is all well and good but may not be suitable for people with bad credit issues.

Approval time for loans from lending clubs is usually very fast. This is because a strong trust has been built among borrowers and investors which help investors to support borrowers with confidence. These lending clubs endeavor to fund loans at the earliest because of the strong partnership that has been built over time with investors. This is unlike what you would get with a bank that has a long approval process before you can get the loan eventually. Check out this site: https://www.trusttwo.co.uk/borrowing-from-us/advantages-of-a-trusttwo-guarantor-loan