How to get the best deal on a £5,000 guarantor loan
Looking to get your finances back on track with a £5,000 guarantor loan? Find out how to get the most competitive rate available to you and increase your chance of approval.
A guarantor loan can offer you a way of borrowing money if you’ve been refused elsewhere, with the help of a friend or relative acting as your guarantor.
A £5,000 guarantor loan could be used to fund home improvements, a family holiday, a new car or wedding expenses, or perhaps to consolidate existing debts.
If you have a poor or limited credit rating, you could ask a friend, relative or work colleague with a good credit score to act as your guarantor. This means they will be liable if you miss a payment on your loan or are unable to pay. Although loans for higher amounts (eg £10,000-£15,000) require your guarantor be a homeowner, many lenders accept non-homeowner guarantors for £5,000 loans if they have excellent credit and can afford to meet the repayments if you cannot.
Generally speaking, the longer you borrow for, the more expensive the loan. Aim to keep your loan as short as possible while ensuring the repayments are affordable. At a rate of 44.9%, a £5,000 loan over five years would cost a whopping £5,085 more overall than the same loan over one year (but would come with significantly larger monthly instalments).
Compare £5,000 guarantor loans
How to compare £5,000 guarantor loans
Consider each of the following key factors when comparing lenders that offer £5,000 guarantor personal loans:
- Total payable. It’s a good idea to focus on the total amount payable when comparing £5,000 loans. Interest and fees can add a substantial amount to the original loan, sometimes even doubling it.
- Available loan durations. Most lenders require the guarantor loan is paid off in a maximum of five years. While it’s cheaper to pay off the loan in a shorter term, you may wish to extend the period so your repayments are more affordable.
- Rate. It’s important to compare interest rates when deciding on a £5,000 guarantor loan. Be aware the advertised “representative APR” may not be the rate you are offered by the lender. This rate is usually reserved for applications that the lender deems to be the lowest risk.
- Eligibility. Each lender will have its own eligibility criteria for both you and your guarantor to meet. Some lenders request your guarantor is a homeowner, while others accept non-homeowner or tenant guarantors.
How to get approved for a £5,000 guarantor loan
Most lenders try to process your application and give you a decision within 24 hours. However, there are factors which can delay the application, or even result in it being rejected. If you and your guarantor take care to be accurate and truthful in your application, you’re more likely to be approved faster.
- Make sure you’re realistic about what you can afford. The average £5,000 guarantor loan requires monthly payments over £200. Are you sure you can pay this amount? Does your guarantor realise how much they would be expected to pay if you missed a payment?
- Be accurate and honest in your application form. You and your guarantor must be honest with each other about your financial situations. Double-check the application form for errors to avoid delays.
- Check the minimum eligibility criteria. Make sure both you and your guarantor fulfils the separate criteria, such as minimum age, credit rating and that you don’t have shared finances, such as a joint bank account or a mortgage.
- Choose your guarantor carefully. Do they have the right credentials to appeal to a lender? The better your guarantor’s credit score, the better the chance of getting your loan quickly.
- Prep your guarantor. It’s a big responsibility for your guarantor, so they need to be comfortable with what they are taking on. They will also need to be on hand to complete their part of any online forms and, if necessary, available to speak with the lender over the phone. It’s the guarantor who actually receives the funds from the lender, so they will have to transfer the funds to you.
- Be available. Both you and your guarantor need to be able to speak to the lender on the phone or to respond to emails during the approval process.
£5,000 loan illustrations
Get an idea of how much you’ll pay monthly and overall on a £5,000 guarantor loan with our handy table.
|Interest rate of 39.9% fixed p.a.||Interest rate of 49.9% fixed p.a.||Interest rate of 54.9% fixed p.a.|
|2 year term||£290.09 monthly|
|3 year term||£223.50 monthly|
|4 year term||£192.00 monthly|
If your guarantor is a homeowner, you’re more likely to obtain a lower rate of interest. While many lenders do accept non-homeowners or tenant guarantors for £5,000 loans, they may offer higher interest rates or shorter terms.
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