About Guarantor Loans
A Guarantor loan is usually a fixed term loan that repays both the loan advance and interest added over the term of the loan. Interest charged can be fixed or variable over the period of loan and is usually high compared with high Street lenders, typically 30-70% APR. But, as long as you make your regular monthly repayments, you will repay the loan in full over the agreed term. It should be transparent, simple and fair, if not cheap. Guarantor lenders in the UK must be authorised by the Financial Conduct Authority (FCA)
Guarantor loans are used typically by those who have a poor or non-existent credit history, because of this you will pay a higher rate of interest and require someone (usually a friend or family member) to stand as guarantor and make your loan payments if you stop paying. For people in this category a small, short term Guarantor loan can help you improve your credit file.
So how does it work?
Generally, you must be over 18 and have a UK personal bank account, you will also need a Guarantor who will undertake to repay the loan if you don't; for whatever reason. A guarantor will be somebody that knows you and trusts you, such as a friend or relative, usually under the age of 75 and who must have income to support your loan payments if you fail to make them.
Lenders will usually look at the credit files of both the borrower and your guarantor. You will both be asked to prove affordability with an income and expenditure questionnaire as well as the impact a new loan will have on your total debt. Many lenders insist on the borrower being in regular employment and most require the guarantor to be a homeowner or have been at a stable address for a period of time.
How much can you borrow?
Simply as much as you can comfortably afford to repay, but you should only ever borrow the amount you need.
Lenders typically offer loans from £1,000 to £15,000 but the interest charged can also vary based on the size and term of the loan.
When do I get the money?
Most guarantor lenders advance monies to the Guarantor who then transfer the money to the borrower. Most lenders advertise "Fast" approvals and transfer, but typically this is one or two days between application and funds transfer.
How do I make my monthly repayments?
By direct debit, via a debit card linked to your normal UK personal bank account or by bank transfer. Some lenders insist on a Continuous Credit Authority linked to a card of the borrower and the Guarantor. Most lenders do not accept cash.
Will You or your Guarantor be Credit Checked?
When you apply for a Loan most lenders will look at your guarantor's credit file at credit reference agencies (CRAs) such as Equifax, Call Credit or Experian, many will extend this check to the borrower. These agencies will also provide credit information about you including information from the Electoral Register. This credit search is used to check your identity and your eligibility for a loan. The credit reference agencies will add details of these searches and your application to the records which they hold for you.
Your credit reference agency record(s) will be seen by other organisations that make searches with those agencies. Data is shared between agencies.
To prevent fraud, lenders will check your details with fraud prevention agencies (FPAs). If you provide false or inaccurate information and the agencies suspect fraud, the agencies will record this.
Lenders are required by Law under the Consumer Credit Act to provide you with certain information when you apply for a loan. This information will be specific to you and the loan you have requested. You will receive a copy of the pre contract information, sometimes referred to as SECCI before you receive or sign the formal Fixed Term Loan Agreement.
Under the Law you have a 14 day cooling off period after signing your loan to return the funds and rescind the loan.
There are many practical questions and answers in our FAQs section you find useful before seeking a Guarantor Loan