Recent research shows that there is a dramatic movement of borrowers away from payday loans. It’s dawning on borrowers just how expensive payday loans are, and they are beginning to discover the merits of guarantor loans.

Online PR News – 05-March-2013 –Recent research shows that there is a dramatic movement of borrowers away from payday loans. It’s dawning on borrowers just how expensive payday loans are, and they are beginning to discover the merits of guarantor loans.

Payday loans are the lending phenomenon of recent years. Lenders have played on their easy access, but in recent years significant criticism has been laid at their door. There have been claims that lenders have not lived by responsible lending policies, that they have targeted those who can least afford to repay the borrowing, and that they have allowed debts to be rolled over month after month and in so doing driven people into significant hardship and a spiral of debt. Now the whole industry is being investigated by the Office of Fair Trading.

Borrowers are discovering a cheaper and more flexible source of short and medium term unsecured funding – the so-called guarantor loan. Guarantor loans have existed for longer than payday loans but have been slower to take off perhaps because the specialist lenders are more responsible about how they promote the product and also about when they lend.

Guarantor loans are unsecured loans where the borrower provides a guarantor to guarantee the loan. If the borrower should for any reason be unable to make a repayment then the guarantor is required to step in. This means that lenders are prepared to lend in situations where high street lenders would not. Borrowers aren’t judged on their credit history and are not credit scored. If a person is prepared to act as a guarantor then the lenders sees this as guarantor judging the borrower to be credit worthy. After all you only act as a guarantor if you know the borrower well.

Guarantor loans come in two basic types. The first are loans of £50 to £500 with no fixed repayment period. Interest is charged on a daily basis, and over a 30 day period can be 60% cheaper than a payday loan. The second type are larger loans of up to £7500 for fixed term periods of one to five years.

Recent analysis shows that around 70% of applications for guarantor loans come from people who either have or have had at some point a payday loan. This high figure suggests that people are getting wise to the weaknesses of payday loans and are looking for a better value and more flexible alternative. If you need medium term funding then the answer is not to keep rolling over your payday loan. The costs escalate dramatically. If you need short term loans then a short term guarantor loan is significantly cheaper. Why face APRs of up to 4000% when short term guarantor loans have a representative APR of only 199%? Larger guarantor loans have APRs of between 45% and 50%.

It’s worth emphasising that guarantor loan lenders have responsible lending policies that they stick to rigidly. And the guarantors themselves need to satisfy various criteria too. Not all guarantors make the grade and in such situations the lenders simply cannot lend. But lenders would rather have it this way than damage the reputation of the industry. After all nobody wants a repeat of the payday loan market.

You might think that the process of obtaining a guarantor loan is all rather tricky but in reality the time it takes to apply and obtain a loan can be as little as 24 hours. Lenders have put a lot of effort into streamlining their application processes and with the advent of e-signatures things can now move very speedily if an applicant has prepared the way for their guarantor.

About Solution Loans

Founded in 2005, Solution Loans provides access to a range of unsecured loans for those with credit problems. Solution Loans works with all the major guarantor loan lenders in the UK.