The Cost of Guarantor Loans
Guarantor loans may not be as cheap as homeowner's loan but they are still relatively affordable and cost-effective when compared with other personal loan options. While payday loans have Representative APRs at around 1,000% and logbook loans at around 400%, guarantor loans keep it reasonable at around 50% or sometimes less.
Whether you're borrowing £500 for overdue bills or £25,000 for a major investment, guarantor loans wouldn't bleed you out in interest. To illustrate, let's say you want to borrow £5,000 that you want to pay off in 2 years. If the variable Representative APR is 50% and the per annum interest rate is 41.6%, you'll end up paying £309.08 per month or a total of £7,419 in 24 months.
The interest rate at first look may seem too high but you need to remember that the loan is repaid in 24 months. When divided over that duration, the interest isn’t as high as what you pay for other personal loans such as payday loans or logbook loans.
In the end, when borrowing money, it’s all about taking out a loan that you can afford. Even if there’s a guarantor who will shoulder the repayments in case you can’t keep up, it’s always a good rule to keep the amount within your means.