During a financial emergency, you need to choose a loan type that precisely serves your circumstances. But sometimes it can be confusing to choose between two loan products.

Guarantor loans and guaranteed loans are two types of loans that cause confusion. But with the right information about both types, you can make a better decision.

Here is a detailed guide and comparison of guarantor and 100% guaranteed approval loans in the UK with their features, pros, and cons. At last, you will read about the varied circumstances that connect to the individual significance of both options.

What are guarantor loans?

Guarantor loans are a type of personal loan in which the primary applicant includes a guarantor who pays the loan in case the applicant defaults. If the primary borrower delays or skips the payment, the lender first needs to contact the guarantor to pay the instalment. In case of no payment at all from the borrower, the whole loan amount is settled by the guarantor.

Features of guarantor loans

Read the features below of these loans and see if this product can satisfy your financial expectations.

Loan amount – The loans offer a minimum of £1000 to £25000.

Interest rate – Lower rate of interest as the lender has another person to contact for repayments in case the main borrower defaults.

Repayment terms – It can span from one year to seven years, just like personal loans. You qualify based on your creditworthiness.

Security – No collateral required; guarantor compensates the lender considerably.

Credit check – Yes, a credit check is mandatory. However, direct lenders can offer a soft credit check that leaves no search footprint. But that too includes basic affordability assessment.

Pros and Cons of Guarantor Loans

Knowing about the benefits and the risks of the loans is vital to deciding whether you actually can depend on these loans or not.

Pros	Cons
Access with bad credit score as lenders approve funds on your creditworthiness.	Guarantor risk is possible. If you miss the payment, the guarantor is legally responsible for settling the loan.
A credit-building opportunity is offered due to customised, affordable deals. Pay on time and improve your credit score.	Both parties’ credit scores may drop in case of issues with repayments. This can affect the financial future.
A large amount at a lower rate is attainable due to the presence of the guarantor.	Not easy to find a guarantor because it makes them completely responsible if you fail to repay.
Personalized support is available, as there are no stringent rules. Deals are designed as per individual financial capacity.	A formal, long process may be required to scrutinise the finances of both applicants.

What are guaranteed loans?

Guaranteed loans are basically loans with a high acceptance rate, but there cannot be a 100% guarantee of approval. It is due to higher chances of approval that some lenders use the term guaranteed.

These are basically soft checks, short-term loans that are offered to people with poor credit. Without a hard credit check, approval is offered based on the current credit purchasing power of the applicant.

Features of guaranteed loans

Here are the specific features of guaranteed loans you should know.

Loan amount - Usually between £1000 and £5000.

Interest rate – The rate of interest is higher than that of guarantor loans, as there is no security or risk compensation for the lender. If you default, no other immediate way out is possible to recover.

Repayment term – 6 months to three years, but for the maximum tenure of three years, you need to have a strong repayment ability.

Quick approval – Right after submission of the online application, the lender generates an instant approval decision followed by timely fund disbursement.

No guarantor required – No other person as guarantor is required to borrow money. Only individual creditworthiness is sufficient to qualify for funds.

Pros and Cons of Guaranteed loans

Have a comparison between the advantages and disadvantages to develop rational decision-making about these loans.

Pros	Cons
Easy and fast approval due to a 100% online loan process.	A smaller loan amount is the limitation with these loans due to the risky profile of the applicants.
Ideal for emergencies, as funds are approved for small needs with an instant decision.	Higher rate of interest as there is no guarantor or collateral to compensate for the risk.
No guarantor demand makes borrowing even more convenient. You do not need to chase people to be your guarantor.	The risk of a debt cycle is always there if you miss or delay repayments. Pending instalments and high interest keep adding.
Credit-friendly lending allows you to borrow despite a poor credit situation.	Shorter repayment terms leave you with less flexibility on the part of instalments.

Which one is better? Guarantor loan or Guaranteed loan?

Now that you know all about guarantor and guaranteed loans separately. It is time to know which one is more suitable in what circumstances.

When to choose a guarantor loan?	When to choose a guaranteed loan?
You have a poor credit history	You have no one as a guarantor
You need a large amount to borrow	You need a small loan amount
You can arrange a guarantor	You want to avoid a hard credit check
You want to build your credit score	You can manage high-interest debt

Tips to choose a lender once you choose a loan type

Once you decide the loan type, follow the suggestions below to find the best deals.

Compare lenders –  Always compare lenders, whether guaranteed or guarantor loans. Don’t rush for the first loan offer you get.

Avoid deals with fake promises – Some loan offers sound too good to be realistic. Don’t fall prey to such offers.

Borrow responsibly – Apply for an amount that you actually need, as that will save you from paying extra.

Improve credit score – Both loans are good for improving credit score. If you can bear a high interest rate, guaranteed loans can do it faster. If you want to do it gradually, guarantor loans are a good choice.

Apply to only one lender at a time – Yes, that is necessary, as applying to multiple lenders shows you are credit hungry. In the case of guarantor loans that include a hard credit check, multiple lenders will leave multiple search footprints.

Conclusion

After the information and comparisons above, you can decide better whether guaranteed loans are better or the loans with no guarantor in the UK. Both loan types are useful. It depends on their loan features, pros, and cons that may or may not match your specific financial circumstances. Every loan solution has its own uses; you just need to spot relevance with your requirements.