If you have lost of debts, then you may wonder whether you could consolidate them into one loan and then it will make them easier to manage. There are consolidation loans where you can do this, but they do tend to be expensive and sometimes it is better option to organise this yourself using a loan of your choice. There are different loans that you could pick for this and a guarantor loan could be helpful in some circumstances. IT is a good idea to think about the advantages and disadvantages of using it so that you are able to decide whether it will be a good idea for you.
Advantages of Using a Guarantor Loan
- You can borrow between £1,000 and £10,000 with a guarantor loan. This means that it is likely that you will have enough to repay quite a lot of debt.
- You will not need to have a good credit rating which means that the loan is available to more people.
- The loan could be pretty quick to arrange so you should be able to get the money that you need quickly and start organising your finances more quickly.
- You will have a nominated guarantor who will cover any repayments that you cannot make. This means that there is no risk that the loans will not be repaid.
- Once it is repaid, you will then be free of debt and no longer have to worry about your loans.
- Having just the one loan can make it much easier to be in control of your money.
Disadvantages of Using a Guarantor Loan
- If your debt is very high, you may find that the amount is not high enough to repay all of it. In this case you will need to consider whether you should get a loan at all or just leave things as they are.
- You will need to find someone who has a good credit rating and is willing to be your guarantor. You will also need to discuss with them what will happen if you do miss a repayment and they are left to do it. Will you repay them and if so, when? If you cannot repay them but they need the money then this could cause problems between the two of you, so you need to be really careful in picking the right person.
- It might be tempting to borrow more money once you take on this loan. As you only have the one loan it may feel like your debt is lower and so you might be tempted to start using your overdraft, credit card or whatever again and you could end up building up more and more debt.
- A guarantor loan could be more expensive than your current borrowing so it could be better to stay as you are. Look into the costs carefully before you make a decision.
- You may find that some of the debts that you want to repay have fees if you repay them early. You will need to investigate this first and see whether it will more expensive to repay them early compared with waiting and just repaying them as agreed.
So, if you use a guarantor loan as a consolidation loan it could help you out of debt. However, you will need to check the costs of doing this and be completely sure that you will not borrow extra money while you have the loan. You will also need to find a guarantor that is willing to cover any repayments that you are not able to make. There are other methods which could help you out of debt too, such a methodically repaying each of your debts and so you need to consider your other options too and compare them before deciding which is best.