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With this type of loan, a family
member or a friend agrees to be your ‘guarantor’ and repay the loan if you can’t afford it.
It might sound like a good idea when you’ve had bad credit or you’ve been turned down by other lenders. But it can make everything a lot worse. That’s because the interest rates are usually around a staggering 50% APR or even more!
You could end up paying back more than double the amount you borrowed.
If payments are falling behind, the lender will ask you to catch up. If you can’t do this, your account will go into ‘default’ and the lender will go after your guarantor for the repayments. That means the family member or friend you nominated will have to pay for you – and that could be really hard and stressful for them too, especially with interest and charges piling up.
This could all happen via a collection agency or court action. And any impact on your credit file
will show up on your guarantor’s credit file too.
People often take out a guarantor loan to pay
off other debts, but there are better ways to sort things out. If you’re thinking about doing this or you’re struggling to repay a loan, look at our debt solution and get in touch. You’re not as stuck as you think and we’ll help you get debt-free.
Get BacktoBlack. Talk to us today
Or, take your first steps to debt freedom
with our online form
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Click below and we’ll tell you a little bit
more about us. Our story is based around
our experience with problem debt.
Find out why we enjoy what we do here at
BacktoBlack, what makes us tick, and how we
can help you change your life for the better!
Don’t worry, we know how you feel.
All these fancy debt words are hard to keep
track of. So to make things easier for you, we’ve
put together a BacktoBlack Debtionary to help
explain the jargon! That way you’ll be up to speed
in no time at all, and ready for that pub quiz.