Thursday 24 April 2014

Why do Guarantor Lenders Need to See Documents?

If you or if someone you know has applied for a guarantor loan recently, then you’ll have probably noticed that the lender needed to see some documents before processing the application. Many lenders will ask their applicants for some kind of evidence of who they are and what they earn, but this is not as common for lenders who advance money to those with a poor credit history.

The point of asking for documents is to provide some extra security for the lender, as well as the customer themselves. By being careful about who they lend to, guarantor loan providers are keeping on top of fraud and protecting their customers (both the borrower and the guarantor) against losses associated with this.

What might I be asked for?

When you apply, you’ll be asked to input your details like your name, address, salary and date of birth. These are the basic details that lenders need to ensure that you can A) pay back the loan you want and B) be checked with a credit reference agency. It’s important that the lender knows that the person applying is who they say they are, as otherwise identity fraud could be an issue. For this reason, you will probably be asked to provide a copy of your driving licence or passport so that they can verify that you are who you say you are. The same goes for the guarantor, as it’s paramount that the person agreeing to guarantee a loan knows what they’ve been signed up to.

You may also both be asked for a proof of income and bank statement. This proof of income could be as part of a wage slip or job contract. This is to make sure that you can afford to pay the loan instalments, and that your guarantor is also able to afford it if they have to step in. Most guarantor loan providers lend responsibly, which means that they ensure their customers can afford to pay back their loan without getting into further financial difficulty. The bank statement can help the lender check that you have enough left over after your essential expenses to afford the loan repayments.

How do I give them the documents?

You should never send original copies of your important and personal documents to a lender. Instead, you can make a copy by scanning it in and sending it via email, taking a clear picture and sending the image from your phone or some lenders will also accept faxes. You may be able to post the copies of your documents also, which means there are plenty of ways in which you can provide the necessary evidence.

Different guarantor lenders may require different supporting documents, and each will have varying options as to how you can get them to the lender. If you’re unsure about what you need to provide, asking the lender then give them a ring. This can help to clear up any confusion, and it can also give you a good idea of their customer service.

Monday 7 April 2014

Comparing Loans For Bad Credit

If you have a poor credit history (or, if you’ve never borrowed before, no credit history at all) then you may find that getting a loan or other kind of cash advance from a bank or other mainstream lender is pretty difficult. This is because the lender needs to see that you have borrowed money and paid it back in full and on time in the past. This gives them a good idea of what you will be like to lend to, and whether they will get their money back or not!

Below we’ve listed the most common types of loans aimed at those who have bad credit histories. When searching for a loan it’s important to look at the pros and cons of each and to think about how the repayment terms fit in with your life.

Logbook Loans – APR 400+%

These loans are secured against the value of your car, motorbike or van, so for the duration of the loan, the lender will effectively ‘own’ your vehicle. You are allowed to keep using it as normal of course, but if you fail to make any of the repayments, it may be taken from you. Because the loan is effectively secured, your credit history may not be searched. This also means, however, that if you pay your loan back in full and on time, your credit history may not be updated either.

Instalment Loans – APR 300+%

Instalment loans are small loans (up to around £1000) which are paid back over a period of a few months. This allows people to borrow a small amount of cash but pay it back in more instalments, meaning that it’s easier to manage. Your credit history will be checked and your credit file will be affected by how you deal with the loan, so paying this back in full and on time should boost your score.

Guarantor Loans – APR 45+%

A guarantor loan can offer more in the way of lending amounts (up to £7,500) but requires a friend or family member to ‘back up’ the loan application, meaning that if you cannot pay, they will be liable to pay on your behalf. Once again, your credit history will be checked first and will be affected by the way you deal with the loan repayments. The repayment terms are between 1 and 5 years, meaning that a higher loan amount could be made more manageable for you.

Payday Loans – APR 1000+%

You have probably heard of payday loans as they have had a huge market presence in the last few years. These are small, short term loans (up to £1000) which are designed to be paid back by the time the borrower is next paid. This means that the full amount owed needs to be paid back at once, which can be tricky for some people. Your credit history may not be checked but a payday loan on your file will look bad to other lenders and could mean you find it hard to get credit in the future.