A guarantor loan can help those individuals who have a bad credit rating who have been rejected by other lenders and financial institutions. Typical payday lenders or high street banks require good credit ratings in order to be successful for a loan.
However, with a guarantor loan, the lender feels that they can trust the borrower if they have the trust of a guarantor with a good credit rating. Many lenders follow the motto of “if the guarantor trusts you then we do too.” So this gives a bad credit customer access to affordable finance that they would not get elsewhere.
The best thing about a guarantor loan is that if you repay on time, it will boost your credit rating. So the customer, who previously had bad credit, can prove that they are a good customer and rebuild their credit profile. A better credit rating will make it easier for that person to access finance in the future at more affordable rates.
As explained in “The guide to understanding guarantor loans” from https://www.guarantorloanlenders.co.uk some customers have been unlucky to have bad credit. Perhaps they have had an emergency expense or they have had problems getting paid on time at work. At least a guarantor loan offers a very reasonable interest rate and a logical way to improve one’s credit score.