As the finance markets have looked to evolve their model post the crashes of 2008 they have had to find new ways to provide finance to those with irregular credit history.
The biggest issues of the banking crisis on both sides of the Atlantic were around the lending of money to people who didn’t have the means to pay them back or without doing their due diligence on the individuals finances.
I previously written about the rise of short term finance and when that might be an option to your cash flow problems. Another solution that has arisen in the last 5 or so years are guarantor loans.
These have arisen in response to the accusation of making sure borrowers can find a way of repaying, but also represent a way of those with irregular credit history from securing a finance solution when they need it. Here is how they work:
- You find somebody willing to be a guarantor for your loan who has a more favourable credit history.
- You place an application for a loan in conjunction with your guarantor. Generally loans are £1000-£10000.
- Should you be approved you money will be paid to you.
- If you get into difficulties repaying you loan then your guarantor will be expected to step in and meet the repayments.
This is obviously no small commitment for the guarantor but obvious if you keep up your repayments they need to do nothing more. For you as the lender, it can enable you to access finance you may not be able to do on your own so it can be a useful way to access money should you need it.