Guarantor Loans are newest kind of lending options that you can get hold of. If you are having a low credit score or a bad credit, then you will be able to use these guarantor loans in order to get instant cash. A lot of people suggest that guarantor loans are a kind of scam. However, these loans are certainly the newest and the easiest way to find finances for yourself when you need them desperately. You will be able to borrow money for any reason with these loans. However, because these loans are new, many people have a few misconceptions about these loans. Let us have a look at few of this misconceptions.
Guarantors have to give their bank details for the loan to be sanctioned
It is completely untrue that the guarantors have to hand over all their bank details to the lender. In fact, there are many guarantor loans where this kind of details are not needed at all. If you go to the smaller companies, you will be finding any extremely easy process of handing over guarantor loans. They try to build relationships instead of providing finance to the users. As a result of this, the lender does not really have to think about the guarantor unless the borrower has died.
The interest rates are high
Many people believe that the interest rates of the guarantor loans are very high. There is a very small number of unsecured borrowers. These people have to pay a little higher rate of interest, owing to the risk involved in the lending process. However, it is to be noticed that most of the people will opt for secured lending in which collaterals are given. Hence, the rates are really very low, owing to the lower risk involved in this kind of lending.
The loans are secured against the property of the guarantor
This is one of the biggest myths about guarantor loans. It is true that the guarantors need to be homeowners in order to qualify for the loans. However, their property is not to be used as a security for the loan. The reason why guarantor loans demand people who own a house is because these people are more likely to repay their loans. If they don’t, their mortgage rates are directly affected. Paying these loans back on time helps in keeping their financial track record safe and sound for a very long time.
All the loans that we review or recommend all have:
- Minimum period of repayment: 6 months. We do NOT recommend taking any loan with repayment period of less than 6 months, as you will have difficulties paying back
- Maximum period of repayment: 3 years
- Annual Percentage Rate (APR): less than 12%. Any rate higher than this will negatively impact your finance
- Below is an example of the loan mentioned in this article, with a loan amount of $20,000
|Flat Interest Rate||7.50% p.a. (Effective Interest Rate of 14.39% p.a.)|
|Total Interest Charged for the Loan||$20,000 x 7.50% p.a. x 3 years = $4,500|
|Loan amount + Total Interest||$20,000 + $4,500 = $24,500|
|Monthly Instalment||$24,500 / 36 = $680.56|