The fact that there are a number of different loans available to choose from should be seen as a positive thing, because the more options that people have available to them, the better. However, not every type of loan will be suitable for every person, and this is why it is important to understand the differences between the different types of loans that are available. You may have been informed that a guarantor loan is of benefit to you, so knowing what a guarantor loan is, and what it entails of will be of great benefit to most users.

A guarantor loan is a style of unsecured loan that requires someone to co-sign the loan agreement. The name for this style of loan comes about because this person is recognised as guaranteeing that the loan will be repaid, because they have agreed to repay the debt should the person borrowing the debt default on the loan repayments.

Many people find a guarantor loan suits their current circumstances

This is a style of loan that has been popular for a long period of time but in the current climate, the availability and use of guarantor loans are on the up. This is because they are seen as being a credible alternative to pay-day loans. A guarantor loan is ideal for people who:

• Have no credit rating
• Who have a poor credit rating

While this style of agreement has been common in many financial contracts or agreements, such as letting contracts or in the mortgage industry, they are becoming increasingly common with unsecured loans. There are benefits to all parties from this style of loan. The company issuing the loan can have a greater degree of confidence about receiving payment. The person receiving the loan is likely to receive a wider range of loan offers or a loan at a more attractive rate due to the fact that they have someone acting as a guarantor.

An individual without a credit rating or with a poor credit rating may find that their unsecured loan options are very limited, so anything which widens their options has to be seen as a positive thing.

There is obviously a need for the borrower to find someone who is willing to act as their guarantor. This is not an action or role that should be taken lightly, because if the borrower defaults on their payments, the guarantor may need to find a lot of money at short notice, depending on the terms and conditions of the loan agreement. However, in trying to find the best loan option and presenting the best possible image to financial institutions, there is no doubt that guarantor loans are an increasingly sensible option for many people.