Guarantor loans are desirable as they are quickly processed and do not take into consideration the poor credit rating of the borrower once being backed by an acceptable guarantor. A transparency is offered by the lenders in the interest charges while trying to procure a guarantor loan. There are no hidden charges or extra fee charged on these guarantor loans.
The interest is charged on a guarantor loan on an everyday basis. This is a great thing as the borrower has the option to make an early repayment and save a great deal on the interest rates. The added incentive is that the borrower isn’t penalized for making an early repayment. There are online calculators which the borrower can make use of to estimate the interest charges.
There are few lenders however who specify fixed rates on the loans. However, there are plenty of lenders who charge a variable rate on guarantor loans. It is vital to understand the terms of the loan and to estimate the actual cost of the loan by considering the Annual Percentage Rate [APR] of the loans.
High APR Charges
The APR charged on a guarantor loan varies from one lender to another, the loan tenure and as well as with the loan amount. The choices are limited when it comes to guarantor loans. When a comparison of representative loans is done, it can be found that they are relatively high varying from 14.2% to 62%. The interest rate on these loans is typically high in comparison to loans offered on a good credit rating. However, a borrower can borrow more amount through a guarantor loan and also much easily in comparison to other loans. In many a cases, the loan amount exceeds 100% of the actual amount borrowed depending on the APR being charged by the lender.
Guarantor loans aren’t backed by any regulations like payday loans and there isn’t any cap on the amount being charged as interest on these loans. This implies that a borrower would end up paying more than what was originally borrowed while opting for a guarantor loan. Both payday loans and guarantor loans have exceedingly high rate of interest. However, these seem to be the best option for people who are in need of quick cash and can be backed by a guarantor. These loans also help in improving the poor credit rating which is a very good option for future needs. Despite the high interest charges, Guarantor loans have gained immense popularity when it comes to obtaining hassle-free loans by people who have been denied a loan elsewhere.