Are guarantor loans the new “Bank of Mum & Dad”?

Last post: Jan 4, 2018

With younger people struggling to fund everything from higher education to their first step on the property ladder, many parents are also starting to feel the financial pressure making guarantor loans a more realistic option than a loan from the “Bank of Mum & Dad”.

Banding generalisations like "baby boomers" and "millennials" around can be a dangerous game, riddled with stereotypes and recriminations. But there is no denying that the younger adults of today are finding "getting going" an awful lot more costly than their parents brought up in the 60s.

From eye-watering tuition fees to ever-climbing rents and the seeming inaccessibility of mortgages, life is a real financial challenge for younger adults who must do battle with high costs of living and stagnating wages.

Bank of Mum & Dad in trouble

Once upon a time (perhaps a decade ago) the Bank of Mum and Dad was often a viable option for younger people seeking finance to support their "launch" into adulthood. Whether it came in the form of a generous and informal loan, a lump sum to be used as a deposit or ongoing rent payments throughout university, many young adults were able to overcome steep costs and limited capital.

Today, however, even the Bank of Mum and Dad is feeling the strain. Although parents are still the 9th biggest lender in the UK, the mums and dads of today's young adults have not benefited so substantially from economic fluctuations and the financial challenges facing all generations are ever-more imposing.

Guarantor loans fill the breach

With the Bank of Mum and Dad strapped for cash itself, guarantor loans, secured by parents are increasingly filling the gap for young people keen to move forward with their lives. This trend is reflected in the ongoing rise of non-standard loans – with guarantor loans contributing significantly to this increase.

Are you looking for a guarantor loan to suit your circumstances? Find out more about how guarantor loans work and talk to our finance experts to get started.