Guarantor Loans

With the increasing numbers of people going on to further education, many students are facing concerns about how they will finance their studies. There is an increasing trend to finance studies by taking out loans. Figures published by the Student Loans Company show that the numbers of students taking out loans with them is rising each year, and in the year 2007/8 this figure had risen to 746,200.

The Student Loans Company provides student maintenance loans, and grants for tuition fees and living costs. However, the company sets limits on how much students can receive. Their latest published figures show that the maximum maintenance grant allowed is £2765.00 for students in England and Wales, and the maximum maintenance loan is £4625.00 for students living outside London (£4280.00 for final year students). When you take into account a student's living costs as well as the associated costs of studying, such as, books, computers and travel, these amounts do not stretch far. Add to that the increasing cost of living and some students may find that they need to borrow more.

As a student you may find it difficult to obtain loans from other sources such as the banks, because you do not have a source of income. However, with a guarantor loan it is possible for you to obtain a loan quickly, and, depending on the lender, you don't always have to have a credit check.

Guarantor Loans are not just for students. You may consider a guarantor loan because you are unable to obtain a loan on your own, because of a bad credit history, for example. Sometimes lenders ask for a guarantor if the applicant is under a certain age, or if they haven't built up a credit history yet because they haven't obtained credit before.

To qualify for a guarantor loan you must have somebody willing to act as a guarantor for you. This means that they must be willing to take over payment of the loan if you default. This doesn't necessarily mean that they will have to use their home as collateral, but it is best to check this before signing an agreement.

It is also possible to obtain guarantor credit cards. The advantages of obtaining credit using a guarantor are that you will be able to obtain better credit terms than you could on your own. The downside is that if you default on the payments, you could risk damaging the credit rating of your guarantor as well as yourself.

Guarantor loans are available to anyone who fulfils the criteria set down by the lender. This could include stipulations as to age, location and the operation of a bank account. An important requirement is that you have someone who has agreed to take over payment of the loan if you are unable to meet the payments. This should be somebody who knows and trusts you such as a parent or other relative or close friend.

Because of the consequences of non-payment of guarantor loans in terms of the effects on the guarantor as well as yourself, it is important to give the matter serious consideration about your ability to repay before taking one out. In the case of students, this type of loan may be more suitable if you are nearing the end of your studies and likely to be in full-time employment soon, or to temporarily bridge the gap whilst you are waiting for your student grant or student loan payment to arrive.