A guarantor loan can be a great solution for those who struggle to get approved for traditional loans due to a poor or limited credit history. However, to ensure you secure the best terms, it's essential to conduct thorough research and plan ahead. Without adequate preparation, you could end up paying higher interest rates and additional fees, making the loan less affordable in the long run.
Guarantor loans involve a third party, known as the guarantor, who agrees to take on the responsibility of repaying the loan if the borrower cannot. While this setup can increase your chances of approval, it’s important to follow the right steps to minimise costs. Below are 10 effective strategies to help you secure the best possible deal on a guarantor loan.
1. Compare Offers from Multiple Lenders
One of the most important steps in securing a good deal on a guarantor loan is to compare offers from different lenders. Each lender will have different interest rates, fees, and terms, so it's vital to shop around and get quotes from several providers.
Pay close attention to the annual percentage rate (APR), which reflects the total cost of borrowing. Also, consider the loan term carefully – while a longer term can lower your monthly payments, it may increase the overall cost due to the added interest. Always ask for a detailed breakdown of fees and terms in writing so that you can compare the offers accurately.
Avoid rushing into the first deal you find. By taking the time to explore your options, you can find a more affordable loan with lower monthly payments and reduced overall borrowing costs. Many lenders advertise their rates online, making this step straightforward.
Angel Loans ensures its rate is fully visible and transparent for borrowers to compare easily.
2. Improve Your Credit Score Before Applying
While guarantor loans are designed for those with poor credit, improving your credit score before applying can help you secure better terms. The higher your credit score, the more likely you are to receive lower interest rates.
To boost your score, make sure you pay all your bills on time and keep your credit card balances low. If possible, clear any outstanding collections or defaulted loans. You can also become an authorised user on someone else’s credit card, allowing their positive payment history to benefit your credit report.
Additionally, consider using credit-building products, such as credit builder loans or secured credit cards, to demonstrate responsible borrowing behaviour over time. Even small improvements to your credit score can make a significant difference in the terms you’re offered.
Before applying for a loan, check your credit reports from the main UK credit reference agencies (Experian, Equifax, and TransUnion) for any errors. Correcting inaccuracies will ensure lenders see an accurate representation of your financial responsibility.
3. Assess Loan Add-Ons Carefully
Some guarantor loan providers may offer add-ons, such as payment protection insurance at an additional monthly cost. While these products can be beneficial in certain circumstances, it’s important to assess whether they are truly necessary for your situation.
For instance, payment protection insurance may cover your loan repayments in the event of illness or unemployment, but it usually comes with limitations and waiting periods.
Always read the fine print and understand the exclusions and duration of coverage before agreeing to any add-ons. Only opt in if the cost justifies the potential benefit.
A guarantor loan from Angel Loans has no added fees - guaranteed!
4. Choose a Shorter Loan Term
When applying for a guarantor loan, carefully consider the loan term length. While a longer term may reduce your monthly payments, it can increase the overall cost of borrowing due to the added interest.
Opting for a shorter loan term, even if it comes with slightly higher monthly payments, can save you money in the long run by reducing the amount of interest you pay. Make sure the term is manageable within your budget while minimising interest costs.
At Angel Loans you can choose your loan term from 12 - 60 months - its your loan, its your choice!
5. Avoid Loans with Early Repayment Penalties
Some guarantor loans include penalties for early repayment, meaning you’ll be charged a fee if you pay off the loan before the agreed term. Always check whether early repayment penalties apply before signing any loan agreement.
Ideally, choose a loan that allows you to repay early without penalty. This flexibility can save you money if you’re in a position to clear the loan sooner than planned, reducing the total amount of interest you’ll pay.
At Angel Loans, you can settle your loan at any time penalty - that's a promise!
6. Ensure Your Guarantor Has Strong Credit
Your guarantor’s credit score and financial stability are important factors in determining the terms of your loan. A guarantor with a strong credit history and a stable financial background can improve your chances of securing better loan terms and lower interest rates.
Before applying, check that your guarantor has an excellent credit score and a history of timely payments. The stronger their financial profile, the more likely the lender will be to offer you favourable terms.
At Angel Loans we will require your guarantor to have a strong credit and good affordability in order to qualify.
7. Explore Peer-to-Peer Lending Platforms
In addition to traditional banks and lenders, consider applying for a guarantor loan through peer-to-peer (P2P) lending platforms. P2P lending connects borrowers directly with individual investors, which can often result in more competitive rates and terms, especially when you have a guarantor backing your loan.
P2P lenders usually offer greater flexibility and lower overhead costs, which can work to your advantage. Be sure to compare several P2P platforms to find the most suitable offer, and carefully review the terms before proceeding.
At Angel Loans we avoid then need for our borrowers to explore other options by providing the best value solution.
8. Use an Online Loan Calculator
Before accepting any loan, use an online loan calculator to estimate your monthly payments, total interest costs, and overall loan expenses. Loan calculators allow you to adjust variables like loan amount, interest rate, and term length, so you can see how different factors will impact your repayment plan.
This tool helps ensure that the loan you’re considering is affordable and won’t place undue strain on your budget. Many financial websites offer free loan calculators, making it easy to estimate costs before committing.
Feel free to visit www.angelloans.co.uk and use our free to use loan calculator to work out how much you want to borrow, the monthly repayments and total interest payable - it very easy!
9. Opt for a Fixed Interest Rate Loan
Choosing a guarantor loan with a fixed interest rate can help protect you from fluctuating borrowing costs over time. Fixed interest rates remain constant throughout the loan term, ensuring that your monthly repayments stay the same.
By securing a fixed rate, you have greater predictability over your financial obligations, making it easier to budget and avoid unexpected increases in your monthly payments due to rising interest rates. This can be especially beneficial during periods of economic uncertainty when interest rates are more volatile.
At Angel Loan are interest rate is fixed, you can budget in the knowledge your repayments will not change unless you make an overpayment.
10. Request a Loan Quote Without a Soft Credit Check
Many lenders offer the option to receive a loan quote without performing a hard credit check. A hard credit check can temporarily lower your credit score, which is something you want to avoid, especially if you're comparing multiple loan offers.
Look for lenders who provide soft credit checks, which allow them to give you an accurate quote without impacting your credit score. By doing so, you can compare multiple offers without damaging your credit, giving you a clearer picture of the best deals available before you apply formally.
At Angel Loans we only do soft credit checks to approve both the borrower and guarantor loan application. We only convert to a hard search when the loan is approved!
Final Thoughts
Securing the best deal on a guarantor loan is possible with the right approach, and at Angelloans.co.uk, the UK's leading guarantor loan provider, we make it easier for you to access guarantor loans. By comparing lenders, improving your credit score, negotiating terms, and selecting flexible repayment options, you can reduce your borrowing costs. Additionally, taking into account the strength of your guarantor’s credit, exploring peer-to-peer (P2P) lending, and using online tools can further enhance your chances of securing a deal that fits your financial needs.
While guarantor loans provide a viable solution for those with limited credit, it’s crucial to approach them carefully. Ensure the loan is within your budget and have a clear repayment plan to avoid unnecessary interest and fees. At Angelloans.co.uk, we’re here to help guide you through the process with confidence.
Got more questions? Feel free to reach out, and we’ll help you get the answers you need. Call the Angel Loans sale steam on 0333 577 2000.
If you would like to see our legal contractual documents, these are available at www.angelloans.co.uk
Representative APR (Variable) Example:
If you borrow £1,000.00 over 18 months at a flat rate of 49.8% per annum [fixed], and with a representative 63.0% APR, you will make a total repayment of £1,439.27. The total charge for credit is £439.27.
