Being a Guarantor – what does it mean?

For an in-depth description of what it means to act as someone’s guarantor you should read this article. Ultimately if you believe that you know the applicant well enough so that you can trust them to repay the loan in line with the terms then there should be little to be concerned about. In effect your knowledge of the person serves to replace the computerised credit scoring that has traditionally been conducted by lenders.

Historically a guarantor would have had to provide copies of identification and financial information but recently this particular lender removed the requirement for this.

More information videos are available on our video channel.

A Lender’s Point of View

“We don’t look at credit scoring or residential status for the loan applicant. The reason we lend money with a guarantor is because we believe that an applicant’s friends and family (their potential guarantors), know them better than a credit scoring system ever could. Therefore you are the best person to decide if we should lend money to someone.

We ask a guarantor to cover the monthly payment when the applicant may be unable to. This allows us to keep lending and because of this, we can accept thousands of people who would otherwise be turned down, and offer a lower APR and better service than other sub-prime lenders.

We think standing guarantor for someone is amazing. A lot of our customers haven’t got any credit at all or have had bad credit in the past, they use a guarantor loan to establish or improve their credit file, and they wouldn’t be able to do this without you.”

But please be aware that a default by a borrower will impact on the credit file of the guarantor so you should not agree to become a guarantor unless you know the applicant very well and feel you can trust them sufficiently.

The Guarantor’s Involvement in the Loan – a lender’s comment

“Once the application is being processed a verbal contract call will be carried out with the guarantor prior to the funds being paid out.

Please note that the guarantor can get in contact with us at any point via email with any queries they may have or by telephone once the loan has been completed.

It is our company policy that funds are transferred directly into the guarantor’s account, this is to prevent identity fraud.  No exceptions can be made regarding this, however once funds are available in the guarantor’s account, they can automatically transfer the funds to the applicant’s account.

The guarantor will be sent monthly statements so that they know that the loan is being repaid correctly.”

Who Can Become a Guarantor?

These are the general guidelines, but because we are extending the number of lenders who we deal with it may be that these will broaden:

• Are you a UK homeowner?
• Are you aged over 23? (note: we now have lenders who will accept retirees as guarantors)
• Do you have a good or only slightly imperfect credit history? (note: this has recently been relaxed)
• You need to have an income of at least £800 per month