In January 2015, the Financial Conduct Authority released its new rules and regulations about payday loans. They introduced the rules to cope with the increasing national debt per capita, which had penetrated the roots of nation like an incurable disease. People were taking out payday loans to pay their bills and send their kids on vacation. However, after the new rules, payday lending fell surprisingly, counting to around 50% reduction in numbers specifically in England and Wales.

The effect of decrement in payday lending on overall debts has yet to be revealed. However, there could be a significant increment in guarantor loans, which is a safer way to lend money. In some circumstances, nothing works better than a guarantor loan. Following are some benefits and reasons to choose guarantor loans.
Benefits of a Guarantor Loan

1. The guarantor loans provide maximum coverage for guarantor categories. The only requirement is that the guarantor should be at least 21 years of age. You may ask your parents, colleagues, friends, and anyone else to become your guarantor.
2. A guarantor loan works like a payday loan, but in a securer manner. It is fast, responsive, short-term, and contains high interest.
3. Generally, a guarantor loan takes 3–6 repayments to repay the loan principal as well as the interest. Apart from its reduced stress, it is also reliable as the interest on principal does not multiply over the years, like other loans.

When You Need Limited Guarantee

A limited guarantee applies on a certain amount of the loan only. For example, your guarantor may provide your guarantee on 25% of the loan amount. A limited guarantee is required when you are eligible for smaller loan but you need extra loan amount to fulfil your need.

When You Have Bad Credit

Guarantor loan is an unsecured loan. When you apply for a guarantor loan, the lender considers your creditworthiness to evaluate the interest on principal. However, you may use the good credit score of your guarantor to negotiate with the lender and reduce the interest on principal.

When You Need a Home Loan without Equity

The lenders usually do not provide long-term home loans on guarantee. However, every lender works on their personalized policies, which means that you may find a lender who gives guarantor home loans. The borrower only needs to spend healthy amount of time in researching the market. In this case, you can get a home loan by using the home of your guarantor as equity. Remember that the lender may repossess the equity if you fail to repay the loan amount.

The lender becomes eligible to take the borrower or the guarantor to court if the borrower fails to repay the loan amount. However, it is important to evaluate your eligibility to repay the loan before taking it out. The borrower may also settle the case out of court in consent with the guarantor. You may also get consultation from Financial Conduct Authority in this regard.