subject: Cold hard facts about Guarantor Loans [print this page] Cold hard facts about Guarantor Loans Cold hard facts about Guarantor Loans
Guarantor loans are special loans that allow people with a poor credit history (even an absolutely terrible credit history!) to obtain a loan of up to 3000 and assuming you find someone applicable to endorse your application (the guarantor), then you are guaranteed to get accepted.
This is an unsecured loan which means that it is not secured against your property or other asset (this is definitely not a logbook loan or anything similar!) and is particularly suitable for:
* Tenants - private or local authority
* Homeowners without equity in their property
* People living with their parents / family
In addition and as mentioned before, there are absolutely no credit checks which means that even if you do have a track record of missed rent or mortgage payments, late credit card payments or even if you have a few defaults or county court judgements (CCJs), then as long as you provide a suitable guarantor, then you are 100% guaranteed to be accepted.
How does a guarantor loan work?
The loan works like this; the borrower makes an application through the usual channels. They will also provide details of the person who will be their guarantor (more details on who this can be further on) on the application.
They will then work out the repayment schedule, the interest rate (usual high street rates) and the repayment period and then the lender will assess the application based on the guarantor's credit history, not the borrower's. Once agreed the loan will then be paid into the borrowers bank account and a monthly direct debit will be setup in the borrowers name and all monthly repayments will come out of the borrowers bank account.
So where does the guarantor come in?
Aside from the initial assessment, the guarantor will have no further part to play unless the following situations arise:
* Borrower cannot repay the loan
* Borrower will not repay the loan
If either of these situations develop, then the guarantor will become liable for the outstanding loan including costs. The lender can also instigate legal proceedings against them and not the borrower, if the loan is not repaid under the terms of the loan agreement, so they will need to understand the role they will play and their legal obligations in respect of the loan. Obviously, any non repayment will reflect on the guarantor and not the borrower which means that the main credit reference agencies such as Equifax and Experian will be informed and this will severely hamper someone's ability to get accepted for any future credit.
Who can be a guarantor?
As long as the person endorsing your application is a homeowner, has a clean credit history, is employed in a full time position and is over the age of 21, then it can be absolutely anyone. You could call upon a family member, neighbour, colleague or in fact anyone who has a clean credit history and is prepared to back up your application and of course, be responsible should you not meet your obligations with the loan.
And finally it is worth remembering that taking out a guarantor loan will mean that the borrower will be taking on certain responsibilities and regardless of whether they are responsible for the repayment or non-repayment of the debt; they have to understand the implications. However there is a plus side to this as it also means that if the loan is repaid on time every time, then the borrower's credit profile will also improve as an indirect result of the loan being conducted properly throughout the term.
