Monday 24 February 2014

Guarantor Loans – Combining independence and security

Introduction

If you’re looking to borrow a few thousand pounds then there are a wide variety of options available to you. Firstly, there’s the 0% purchase credit card which allows you to spread the cost of a large purchase and pay no interest on the balance over an introductory time period of up to 18 months. Then there are loans; depending on your credit history you could find yourself eligible for a small personal loan via your bank, an instalment loan, a guarantor loan, a logbook loan or a peer to peer loan. Of course, there may also be the option of borrowing from a family member or friend; however this luxury won’t be available to everyone.

Establishing a good credit score

If, like many, you’re a young adult who is looking to establish a good credit score and prove yourself as a responsible borrower then simply borrowing from your parents is probably not going to interest you. However, having never been responsible for repaying a large credit commitment each month, taking out a loan may be something that you are anxious about. In this situation a guarantor loan may be the best option for you.

The guarantor loan product

Contrary to popular belief, guarantor loans are paid out in the borrowers name meaning it is primarily the borrower’s responsibility to repay it. What this also means is that providing you keep up with the repayments throughout the loan term, guarantor loans will help to improve your credit history. The great thing is, if you are ever unable to repay the loan, you have the support of a third party individual (often a family member or friend) to ensure that the payments are never missed and your credit history is unaffected. In this sense you could essentially say that guarantor loans offer the perfect blend of independence and security.

Can I get one?

Guarantor loans are often described as a ‘bad credit loan’ product which means they are suitable for both those with poor credit history and no credit history. As I outlined above, you will have to find someone to support your application and guarantee the monthly repayments. The guarantor must be a homeowner who has good credit history and is receiving a regular income. Anyone can stand as guarantor, although some lenders will be unable to accept a spouse or partner as guarantor due to the financial link. As long as you can find a suitable guarantor and can comfortably afford the scheduled repayments of the loan, you have a good chance of being approved.

How do I apply?

The vast majority of guarantor loan lenders will now be based online meaning there is very little paperwork involved in the process. Search engine results pages will be littered with brokers and comparison engines so to avoid any hassle, always try to apply with those who are direct lenders. Providing both you and the guarantor meet the criteria of the lender then the loan can be paid out the same day as you apply.

Read more of our articles to learn more about the guarantor loan process.

Friday 21 February 2014

Speeding up your Guarantor Loan Application

One of the great things about guarantor loans is their process speed. Providing everything goes smoothly most lenders will be able to pay the loan out the same day as you apply, however this will hinge on your ability to submit the relevant documentation swiftly and correctly at the first time of asking.

Obviously, each lender will have a different process however throughout this article we are going to discuss how you can speed up your guarantor loan application.

Do the calculations

One sure-fire way to slow down your application process is by changing your mind about the loan term or loan amount half way through. This is because when you change the details of the loan, both you and your guarantor will have to re-sign your relevant agreements. Before you even apply make sure you have calculated exactly how much you need and have stipulated your loan term to ensure that the repayments fit your affordability criteria.

Make sure your guarantor is suitable

One of the main stopping points in the guarantor loan process is when the lender carries out suitability checks on the guarantor. As I outlined, different lenders will have different criteria regarding the guarantor, however generally a guarantor must;

  1. Be a homeowner
  2. Have a good credit history
  3. Be in receipt of a regular income

Some lenders may also require the guarantor to be on the electoral roll at their current address or be in full time employment, but these are the general guidelines. If your guarantor fails to meet any of these criteria points then the lender will require you to find another guarantor which will simply slow down the process.

Be willing to provide additional documentation

The majority of checks in the guarantor loan process will be automated, however occasionally these checks will fail and the lender will require you to submit some supporting documents. This may include; proof of ID (such as a driving license or passport), proof of income (such as a bank statement or payslip) and/or proof of address (such as a utility bill).

There are various ways in which you can send these in including email, text or fax. By taking a picture of these on your smartphone as you apply, you can be confident that if you are asked to provide any of them you’ll always have them at hand.

Conclusion

It is inevitable that the lender will have to speak to both yourself and the guarantor over the phone at some point during the application process. So, make sure that you always have your phone on you, and you make the guarantor does the same. The easier the lender can contact you, the quicker the application can get paid out.

Thursday 20 February 2014

Been Turned Down For A Loan Or Credit Card?

According to some reports, someone is turned down for a credit card once every 7 seconds. As the economy starts getting back on its feet again, credit card companies are finding that applications are on the up, as people are no longer afraid to spend their cash (or indeed, the bank’s cash initially). We may have all settled into this idea a little too soon however, as the amount of people being declined is rising. This is because the credit card companies, as well as the banks and supermarkets, are still very wary about lending money. In other cases, credit companies are too eager to lend, causing issues with things like payday loans and doorstep loans that people may not be able to afford. If you want to borrow some money at the moment, but your credit rating isn’t the best, then you could find that the banks, supermarkets and credit card companies are unwilling to lend to you.

Research Your Options

If you’re sure that you want to borrow money for the right reasons, and you know that you can afford to pay back what you borrow, then it’s important not to give up on your credit hunt. Many people, once they’ve been turned down once or twice, fall into getting a payday loan for a small advance on what they want to buy, only to find that the loan is hard to manage. There are plenty of other options out there for those who have been turned down by the more mainstream lenders, and they don’t all have to be very expensive.

Consider Guarantor Loans

Guarantor loans may be a good option in this case. They’re an emerging kind of loan which used to be popular in the past and which is now coming to the fore once again as a responsible way of both lending and borrowing. With a guarantor loan, you get someone to co-sign your application, which means that they are vouching for you and giving you their support. If you cannot or do not pay the loan instalments, then they will be liable to pay in your place. All good guarantor lenders will perform an affordability check with you before paying you any money, so your guarantor should have no worries that the loan will slip through your fingers. As long as they trust you to pay, then your guarantor-applicant relationship should go without a hitch.

Understand The Contract

Before you sign on the dotted line, it’s important that you understand the contract that you’re signing. Read through it carefully with your guarantor if possible. If you have any questions about it, then contact the guarantor lender as they should be more than happy to answer your queries. This is a good way for you both the gage what the lender is like as a business; their customer service will be a good indication about what they’re like as a whole. If at any point you feel uncomfortable about it, then don’t sign. A loan is something you commit to for years, so it has to feel right.

Tuesday 18 February 2014

What Can Guarantor Loans Be Used For?

Guarantor loans are a unique type of personal loan that are designed for those who have been turned down by their bank. The fact that they are a type of personal loan means that they can be used for almost any purposes – providing it’s legal, of course!

Throughout this article we are going to discuss how guarantor loans can be used to help your financial situations, and outline when they perhaps shouldn't be used.

1. Debt consolidation

One of the most popular uses for guarantor loans is debt consolidation. Customers use the guarantor loan to pay off high interest credit card or payday loan debt. There are many benefits to doing this; firstly, having debt in multiple forms can be overwhelming. You may not be aware of when each payment is due and how much you need to pay meaning before you know it you've missed a payment and incurred late payment charges. By consolidating each item of credit with a guarantor loan you essentially organise your finances into one manageable monthly repayment.

2. Purchasing a car

There are many different ways of financing the purchase of a new car; hire purchase, personal loans, dealership financing and savings to name just a few. The problem is, very few of these options cater for those with a poor credit history or no credit history. Equally, in these tough financial times very few people have the savings at hand to cover the cost of a new car upfront.

Guarantor loans allow those with a less than perfect credit history to get the finance they need and spread the cost of their car. Generally, guarantor loan lenders will offer between £1000 and £5000 meaning they are probably better suited to used cars than new cars. Alternatively, if your old car is in desperate need of some costly repairs, taking out a guarantor loan to fund them could prove much cheaper than purchasing a new car.

3. A holiday

Everyday working life can be taxing which is why a much needed rest can be just what you need to get away from it all. Unfortunately though, the rising cost of living has meant that many have found themselves unable to afford the large upfront cost of a holiday, especially if they have a family to pay for as well.

Many use guarantor loans to help fund the upfront cost of the holiday, purchase some holiday essentials or help with spending money. By stipulating the loan term and amount to fit their monthly affordability they can then enjoy their holiday safe in knowledge that they won’t be out of pocket when they return.

Conclusion

There are many valid and responsible reasons for taking out a guarantor loan, there are also some very irresponsible reasons. Generally, lenders will not lend money for a purpose that they don’t deem to be irresponsible, these reasons may include; fueling a gambling habit, an unnecessary spending spree or extravagant gifts for loved ones. It is important that before you apply for a loan you ask yourself the questions; do I really need to take out a loan and am I going to leave myself in financial trouble as a result of taking out this loan? If you can confidently answer the first question yes and the second question no then go ahead and apply.

Monday 10 February 2014

The Responsibilities of Being a Guarantor

Introduction

There are many reasons why someone may get declined for a loan; it may be due to their credit history, age, income, residential status, the list goes on. Being declined can be demoralising, especially if you’re in desperate need of cash. Fortunately though all is not lost, there are now a number of options available that are specifically designed to help those who have been declined by their bank or mainstream lender.

How could guarantor loans help?

The guarantor loan is a unique type of loan that requires the back-up of a third party individual known as the guarantor. There are a lot of myths flying around regarding this type of loan and indeed the responsibilities of being a guarantor. Throughout this article we are going to debunk these myths and reveal the truth about being a guarantor.

The role of the guarantor

It should be emphasized that being a guarantor is a serious commitment, after all your main responsibility is to pay the loan if the borrower is unable to do so. Admittedly, if the borrower is able to keep up with the repayments throughout the loan term the guarantor will never be called on; but this shouldn't be your mind-set.

The lender themselves should always carry out an affordability check on you to ensure that (if you were ever required to do so) you could afford the repayment amount. Despite this, you need to be fully happy and comfortable that the repayments of the loan wouldn't ever impact your finances in a negative way.

Your relationship with the applicant

It is important that you have a good relationship with the applicant and you have a strong understanding of each other’s financial situation. As guarantor you should be clear regarding why the applicant needs the loan, what they are going to use the money for and how they plan to repay it. If you feel that the applicant is taken out the loan for a reason that they shouldn't (e.g. a spending splurge or an unnecessary expense) then don’t stand as guarantor.

If you do decide to stand as guarantor then you need to remain in constant contact with the applicant. Let them know that if they are having any problems they should contact you first rather than simply allowing the loan to fall into arrears. The last thing you want is to have a call from the lender requesting immediate payment.

Will it affect your credit?

Being a guarantor will not affect your credit history, the only way your credit history could be affected is if both you and the applicant fail to make the payment and a missed payment is reported to the credit reference agency. Consistent missed payment or failure to contact the lender could result in defaults or court orders which will dramatically impact your ability to get credit in the future.

To conclude

If you have been asked to be a guarantor then there are a number of factors that you need to take into consideration. Firstly, do you trust the applicant to keep up with the repayments? Secondly, could you comfortably afford the repayments if you were required to make them? And finally, if you fail to make the repayments are you aware of the impact that it could have on your finances?

Providing you can confidently answer these questions with ‘yes’ then being a guarantor shouldn't cause any problems for you, and could help your friend or family member to get the finance they need.