Even back in the days of cheap and accessible finance, it was invariably tougher for applicants with inadequate credit ratings to get credit. Of course, these days, the financial outlook means that unless you have really good credit, taking out a loan is extremely challenging. This is particularly true for customers without property to put forward as collateral who can only hope for an unsecured loan.

Lately, a new kind of financial product has started to come on the market which will be interesting to many customers with poor credit ratings who are finding it hard to obtain the loan they require. This new kind of product is called a 'guarantor loan'.

The underlying idea is that the actual applicant for the credit doesn't need to have a positive credit rating, or even any credit score at all. All they require is a bank account and identification documents, plus one crucial thing: a friend or family member who is ready to endorse your application by becoming a guarantor.

This guarantor essentially undertakes to take on the obligation of servicing the loan should the main applicant stop making payments. Because of this, the guarantor needs to have a secure credit rating, and also be a homeowner.

Even though guarantor loans have the benefit of making borrowing available to customers who without them would have little or no chance of having their application approved, there are several key drawbacks. To start with, not all of us are able to locate someone willing to act as a guarantor who also has the essential credit rating and security to offer.

Secondly, not everyone will feel happy with the responsibility of making use of their parents to secure their finance. Lastly, guarantor loans are dear when compared to standard unsecured loans – although they're far from as expensive as some other kinds of finance such as cash advances.

Despite these faults, if you really need finance and have been rejected everywhere else, and can persuade someone to stand as a guarantor, then one of these loans may be exactly the kind of thing you've been waiting for.

Article provided by Loans for Tenants where renters of all financial backgrounds can apply for an unsecured loan.

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