A cheaper alternative to Payday loans
moneymarketuk, 02 Mar 2013
There's a cheaper, less well known alternative, namely a guarantor loan, which helps those who have struggled
Since the onset of the economic crisis many people have seen their credit score damaged, often as a result of unemployment and circumstances beyond their control.
As a result there are an estimated 7 million consumers with a less than perfect credit score in the UK who are no longer eligible to borrow from banks and building societies.
Even though the best buy tables are littered with personal loan rates at a ten year low, unless you have a near perfect credit history, you'll be wasting your time applying.
Despite there being a growing number of credit unions across the UK, it is the payday and doorstep lenders with aggressive high profile advertising campaigns and a growing high street presence where more and more people are turning and paying a heavy price for their borrowing.
But there's a cheaper, but less well known alternative, namely a guarantor loan. Most lenders will turn you down flat if you've got a history of missed and late credit payments or a County Court Judgement.
However specialist guarantor loan providers such as Amigo Loans enable UK customers who have struggled with debt previously or who have a limited credit history in the UK to apply for finance and give them a genuine chance to repair their credit rating.
Borrowing £500 via an Amigo guarantor loan at 49.9% APR will cost you £17.50 in interest for one month, whereas the same sum borrowed from Wonga will set you back £155.07 in interest and fees at a representative APR of 4214%.
You'll need to find a creditworthy friend or relative to act as guarantor for your loan and it will be made clear to them at the outset that they will become liable for your debt if you don't make the repayments.
Although the minimum term for a loan is 12 months, if you find yourself in the position to repay the balance early, you can do so without paying any penalty or additional fees. Understandably it's more expensive than borrowing from a mainstream lender, but it's a far more sensible and financially palatable option than going down the 'quick and easy' payday route.
By Andrew Hagger
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