When it comes to obtaining finance, one of the biggest barriers people face is having a bad credit rating. It doesn’t matter what your current ability to pay off a loan is, some companies are only interested in people who have a credit history that shows a person can be trusted. This is slightly harsh because you may end up being punished for something that you did many years ago, and which may not be a true reflection of your current finances and ability to pay off a loan in the present day and in the future.

Credit ratings are important

It is easy to see why finance companies and loan providers utilise credit ratings, because they need to carry out some form of research and analysis on potential loan applicants. If loan companies provided loans to every applicant with no consideration of risk, the loan company would find themselves being run out of business before too long. However, while there is a need for loan firms to carry out analysis of applicants, some potential borrowers may find themselves harshly penalised in their aims.

This is why it is good for people with a bad credit rating to find that there is an alternative finance option available to them. This is where a guarantor loan is of tremendous value to applicants because it is the role of the guarantor that becomes the focal point for the loan company as opposed to the borrower. A guarantor loan for bad credit application is a great way to obtain the finance you need that you may find yourself unable to obtain through the more traditional methods.

Find the most attractive APR

There are payday loan companies that promise to provide loans to people regardless of their credit rating but the problem with these loans is that they come with a very high APR. This means that you will end up paying a lot of money back in interest, which can make a loan untenable. Being able to find a loan at an affordable rate is essential for many folk, and this is where the real benefit of a guarantor loan comes with. With someone else acting as a guarantor, you get to benefit from an improved APR, helping you to find a loan that fits with your budget.

There is a lot to be said for taking out a guarantor loan if you have a bad credit rating because paying it off on schedule or ahead of schedule will help to improve your credit rating. This will hopefully help you to be eligible for a wider array of loans in the future but to start with, using this style of loan is a great way to put yourself on the right path with respect to your finances.