If you are looking for a loan these days, it is understandable why you may find it very difficult. Traditional lenders are not looking to provide loans in the manner that they used to, and this means that you may find yourself being barred from finding the finance that you need. It is important to look for options that will be suitable for your needs and there are some options that will be of benefit to you.
You will be able to choose between a payday loan and a guarantor loan. A payday loan is a (usually) short-term option that provides you with your loan at a high level of interest and that you need to pay back on your next payday. A guarantor loan is a more extended form of loan that you are allowed to pay back over a longer period of time.
There are similarities between Payday Loans and Guarantor Loans
It would be fair to say that there are some similarities between payday loans and guarantor loans. After all, they are both loans. However, there are also some other aspects that the two share and you will find that both of these aspects are found across the two different options:
- Both of these loans are available for people with bad credit
- Both of these loans can provide you with money in a hurry
- Paying off these loans in full and on time can improve your credit score
This may lead some people to think that there are not too many differences between guarantor loans and payday loans but this isn’t the case. There are a number of reasons why opting for a guarantor loan is the sensible option out of both options, and these are some of the most important reasons:
- Guarantor Loans Offer A Much More Affordable APR
- Guarantor Loans Can Be Paid Back Over A Longer Period Of Time
- Guarantor Loans Determine Who Can Receive A Loan By Traditional Methods
- Payday Loans Can Make Your Financial Situation Worse
These are the key factors in why a guarantor loan is the much more attractive option than a payday loan.
The fact that guarantor loans offer a much more affordable rate of APR is the ideal starting point when it comes to finding the finance option that is right for you. Viable guarantor loan companies are providing loans with an APR of around 40% to 50%. When you apply for a payday loan, you may find that the attached APR is around 1,800% to 2,000% which is a massive difference.
It is fair to say that people with a positive credit rating will be able to find a more attractive rate of APR from a traditional lender but if you don’t have access to this style of loan, a guarantor loan is easily the best way for you to obtain the funds that you need.
Guarantor Loans Offer Flexibility
There is also a great deal to be said for the additional level of flexibility that is provided by guarantor loans. The fact that you can pay your loan back over a longer period of time is definitely positive news for most people. Payday loans require people to pay off their loan in a very short period of time, which can cause problems. It is easy to see why it is best to find the loan option that provides you with the greatest degree of flexibility when it comes to finance.
One of the most pleasing aspects about guarantor loans for many people is the fact that they represent a return to the more traditional ways of finance and obtaining a loan. Before computerised credit scores came to the fore, banks would normally determine who would be suitable for a loan by asking them to provide a guarantor. This would offer a good level of confidence for a bank or lender, and they would be more than happy to provide this loan.
You should also think very carefully about the consequences that come from being unable to pay back your guarantor loan. A lot of people have ended up in severe financial difficulty due to the charges involved with missing out on a payday loan payment or with the costs associated with rolling over a payday loan.
All of these reasons add up to opting for a guarantor loan over a payday loan. Everyone is different and you should look to find the loan that is right for you but in the long run, the vast majority of people will find that a guarantor loan is best for their needs.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.