For anyone with mounting personal debt, trying to stay on top of the associated repayments can prove to be tricky at best. An inability to pay bills on time can lead to debts mounting quickly whilst placing you under a huge amount of pressure.
This situation is unfortunately becoming all too common and therefore the importance of identifying a method of bringing your debt under control has never been higher.
An option does exist which can allow borrowers to bypass personal credit rating problems, whilst still offering an effective solution for consolidating debt and improving the credit rating at the same time.
Identifying Effective Consolidation Solutions
The ability to reduce debt is often easier than it sounds. With disposable income at a premium, what should hopefully be a simple premise can prove to be far more difficult in reality.
There are options available to help bring debt under control though with one of the most effective ways of combating mounting debt being to bring everything together into one lump sum. By using this strategy, commonly referred to as debt consolidation, you will be afforded the opportunity to work towards paying off one single debt with one APR (Annual Percentage Rate), rather than several separate debts, all with their own APRs.
How Do Guarantor Loans Work?
Guarantor loans have been designed specifically for anyone who has a short credit history or a very poor credit rating. Because they are personal loans, they are therefore absolutely ideal for use in conjunction with debt consolidation.
Under normal circumstances, potential lenders would view an applicant with a poor credit rating or a large amount of debt as too much of a risk. However with a guarantor loan, these risks are counterbalanced by the presence of a guarantor who will co-sign the loan agreement and undertake a binding commitment to pick up the loan repayments should the borrower fail to do so. This significantly reduces the risk that the lender is exposed to and therefore significantly increases the likelihood of the application being granted.
The loan guarantor can be anyone whom the applicant chooses to ask. Family members and friends are popular choices and as long as they comply with certain criteria such as a good credit rating of their own, being a home-owner, in receipt of a regular income and not already being financial dependent on the applicant, eligibility for the role is very likely.
Because ultimately the responsibility to repay the loan falls onto the shoulders of the guarantor, it is crucial that they have a full understanding of the commitment which they have undertaken. As long as the borrower makes the repayments on time though this will be irrelevant and the guarantor will never have to do anything once they have signed the agreement.
Remove Future Worries
As well as offering the ideal way to consolidate debt, guarantor loans also offer an excellent way to improve the credit rating of the borrower. Assuming that repayments are made in full and on time, a vital demonstration of the ability to keep on top of repayments, whilst reducing the overall debt, will play a central role in improving a credit rating.
If you have a poor credit rating, it is very difficult to acquire the necessary credit to demonstrate this ability but if you secure a guarantor loan you will be able to improve your credit rating by making the required repayments. This in turn will make it easier in the long term to acquire credit on your own.