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Are guarantor loans the way ahead?

As credit in the business and personal finance market remains difficult to obtain for many we are starting to see an increase in guarantor loans. These are effectively loans which are guaranteed by a third-party who would ultimately be liable for any loss on the loan in the event of default. So are guarantor loans the way ahead?

If you're able to agree a loan which is guaranteed by a third-party, and you are confident you can maintain your payments, then this may be an avenue to investigate in order to relieve the financial pressure on yourself. However, it is very dangerous to mix business with pleasure in the knowledge that if you do default on the loan this would see your third-party guarantor out of pocket. The very fact that the UK economy is still struggling, and many believed we could see a downward movement in the latter part of 2010, is also a factor which should be taken into account.

Guarantor loans are very attractive on the surface, especially when you are confident you can maintain the payments, although as we see unemployment in the UK continue to creep higher, the prospect of increased taxes and reduce public-sector investment, can any of us be really confident about the future?

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