What do you do when you’ve previously had credit difficulties and perhaps have already been turned down for a credit card application or a new loan? Rebuilding your credit rating is difficult, even if you’ve already repaid your previous debts in full. Traditional lenders may not be willing to take your business because you don’t qualify under their strict lending criteria.
In the case of Guarantor loans/bad credit guarantor loans, it provides a second chance for people who would find a small four-figure loan useful but are also looking to rebuild their credit too.
Let’s look at the advantages of taking out a guarantor loan.
Improving your Credit Score with a New Loan
It may seem like an oxymoron to borrow money to improve your credit score, but it does actually work that way. The credit record makes note of whether payments have defaulted on lines of credit, loans and credit cards. In the case of a credit card, the number of months of delinquency is even shown to people or businesses pulling a person’s credit report. It shows more information than you’d think.
The advantage of taking a loan out from a credit report perspective is the chance to show that you are capable of borrowing money and being responsible in its repayment. By paying every loan repayment on time, it shows well on your report and your credit score is likely to improve as a result when other lenders look over your credit history and create their scoring for it.
Getting Used to Using Credit Again
Borrowing from companies like TrustTwo who can offer flexible loan terms allows you and your guarantor to permit taking out a loan repayable over a fixed term like three years. By having a guarantor, it’s like having financial training wheels because if you miss a payment, the guarantor steps in to cover the payment. That’s the purpose of the loan in the first place beyond delivering funding to people who need it.
If you’re someone who’s not been great with money management, but your friend or associate has trust in their relationship with you, then it’s a great opportunity to reward their trust. They protect you, so you can improve your credit score and you make sure that you never miss a payment again.
Improving Your Self-Esteem
Getting into previous trouble with credit can lead to feelings of shame and lowers your self-esteem. These feelings lessen but they don’t go away until you take action to address them head-on. By taking out a new lending facility and responsibly repaying it on time, you address your previous failings to create a new responsible you when it comes to money. When you have that realisation, it’s a great day because a whole new world of opportunity opens up to you at that point.
Feeling bad about yourself isn’t a helpful emotion. It doesn’t change the facts about your situation and does nothing to remedy it either. It just sits there making your feel bad. With a guarantor loan, you get to put your best foot forward in a positive way to get access to wider credit markets with an improved credit score down the line. But more importantly, you develop new confidence about your ability to better manage your money which is priceless.
It may seem a little confusing that to manage your money better, you need to take out a loan. Actually, it does make sense because the financial world revolves around behavioural reputation. Creating a new history of behaving better with money loans makes the situation better than sitting and doing nothing about it. It’s a first positive step and hopefully one of many to come.