Even back in the times of cheap and widespread finance, it was always tougher for people with inadequate credit histories to get credit. Of course, these days, the economic outlook means that unless you have good credit, being approved for credit is extremely tough. This is especially the case for customers without a home to put forward as collateral who can only think about applying for for an unsecured loan.

Lately, a new variety of loan product has started to become available which will be interesting to many people with unfavorable credit histories who are struggling to acquire the finance they need. This product is known as a ‘guarantor loan’.

The basic idea is that the actual applicant for the finance need not have a great credit score, by any stretch of the imagination. All they need is a bank account and proof of ID, plus another vital thing: a friend or family member who is willing to second your application by becoming a guarantor.

This guarantor fundamentally makes a promise to take on the duty of making loan repayments should the primary applicant drop behind. Because of this, the guarantor needs to have a secure credit score, and also to own their home.

Even though guarantor loans have the advantage of making finance available to applicants who otherwise would have little or no opportunity of being approved, there are three main drawbacks. Firstly, not all of us are able to find someone disposed to stand as a guarantor who also has the needed credit rating and security to offer.

Secondly, not everyone will feel happy with the responsibility of making use of their parents to secure their loan. Finally, these loans are high-priced when compared to routine unsecured credit – although they’re far from as expensive as some other varieties of finance such as wage advance loans.

Notwithstanding these faults, if you’re desperate for credit and have been refused everywhere else, and can find someone to stand as a guarantor, then one of these loans may be just the type of thing you’ve been waiting for.

About the author: Martin Sumner writes for Loans for Tenants where renters of all financial backgrounds can apply for an unsecured loan.