Guarantor Loans – An alternative to PayDay Loans
A recent article in the Financial Times highlights the role of guarantor loans as the alternative to payday.
The clampdowns on payday lending, which include capping the cost of credit, reduction of loan rollovers and increased affordability checks, has created major waves in the short-term lending market. Wonga has been told to write off the loans of 330,000 borrowers after regulators found they had provided loans to people who could not afford the repayments, and the Financial Conduct Authority (FCA) now expects 397 out of 400 payday lenders to close in the coming months.
There are alternative ways of obtaining short-term credit, says Andrew Hagger a personal finance expert at Moneycomms. “Just because someone doesn’t have a flawless credit record it doesn’t mean payday loans are the only option; they may be quick and convenient but that’s where the benefits stop.”
For borrowers with bad credit, there are other sources of credit available at much more affordable rates. Among these alternatives the FT highlights guarantor loans as a way for borrowers with bad credit to obtain access to funds with the benefit of these type of loans helping to rebuild credit scores.†Through having a creditworthy friend or relative back up the loan,†by acting as guarantor and agreeing to make a repayment should the borrower not be able to, the rates available are much lower than payday.†At George Banco neither the borrower nor guarantor need to be homeowners, making it easier to find someone to help stand by the borrower.
Irresponsible lending by payday lenders has been at the heart of these clampdowns, but at George Banco we are committed to lending responsibly and our underwriters adhere to a strict set of affordability criteria through our advanced decision engine.
Guarantor loans can be a credit score-building way to access money for those with bad credit, but if your debt is becoming too much of a struggle you may need more help. Stepchange Debt Charity offers confidential advice and practical help for those with financial problems. Please contact them on 0800 138 111 or www.stepchange.org.
Learn more about Guarantor Loans from George Banco