It’s been a strange old week. Not only did one of our competitors hack into the back end of our website and try to re-direct our site to theirs (honestly…we kid you not), we have also had to deal with a huge rise in the number of people who have been scammed into paying an upfront fee. We have said this before and we will say it again…NEVER, EVER GIVE YOUR BANK CARD DETAILS TO ANY LOAN COMPANY because there is no need to but we will discuss that in a bit more detail later but in the meantime, back to our ripped off clients.

Incidentally, a rather large loan brokerage have recently had their licence removed by the OFT for a number of practices, one of which was (allegedly) for charging customers an upfront fee for arranging the loan. You can read more about this here and here. However, they are not the only ones and yet it appears that they are the only company that has been brought to book as other firms, large and small, get away with this and have been getting away with it for a number of years.

And in another worrying trend, some loans firms are dressing these charges up as ‘membership fees’ and saying that you are not paying a fee to ‘guarantee’ your loan, rather you are paying to become a member of their club which offers discounts and savings on a number of other consumer goods, the fact that they will also be arranging a loan for you is just part of the total benefits of your membership.

Hmmm…

As we have stated previously on many occasions, we are not averse to a broker charging a fee as long as the broker genuinely does some work on the application and tries hard to get the client the loan they have requested. If the broker is unable to arrange a suitable loan, then all the money taken should be refunded although we accept (as per OFT guidelines) that the broker can retain £5 of it. Where a broker should not charge a fee is if:

• The client is unemployed or receiving benefits (sole benefits – no earned income)
• The client is over the age limits of a particular scheme
• In the case of a guarantor loan, the guarantor is not a homeowner because there is zero chance of that loan going through.
• The client is a student with no earned income.
• The client is too young (usually you have to be 18 or 21 to apply for a loan)

Anyway, back to our lady loan applicant.

She called us as she had had a pretty torrid time with two other loan companies. She is a registered disabled person and her only income is via Disability Living Allowance (DLA) and a state pension. To compound matters, she is 72 years of age which is too old for most loan companies to consider.

She wanted the loan to pay for her husband’s funeral as unfortunately (but like a lot of people her age) she has no life assurance. She has no other family apart from a daughter who is also struggling to pay her own bills so the cost of paying for the funeral is not simply unaffordable , it is completely and utterly out of reach. So naturally, those without the funds to pay for this would turn to a finance company to try and obtain a loan.

Now, we could have told this lady (in the nicest possible way) within 30 seconds of speaking to her that she would have no chance of getting a loan and yet the first company she spoke to told her words to the effect of, “Great news…You have been approved for your loan and all we need off you now is £69 to release the funds”.

Of course this is complete and utter rubbish.

Anyway, she paid the fee as he was pretty desperate and the nice lady she spoke to confirmed that she had “definitely been approved for her loan”. Anyway, despite our client’s fears, in a few days the loan paperwork appeared. However she noticed that the company in question said she now needed to provide a guarantor. REMEMBER…She is 72 herself and the oldest a guarantor can be is 70 AND… there was no mention of her needing a guarantor when they charged her debit card.

This lady immediately called them up and complained but after being put on hold for over 20 minutes, she eventually got through to someone who said she must put her request for a refund in writing to their Customer Services Department. EVEN THOUGH THEY DID NOT PROVIDE HER WITH THE LOAN AS AGREED!

We have seen this scenario so many times and our experience tells us that this lady will never get her money back. Even writing to the OFT doesn’t appear to help so we are pretty sure that is the last she has seen of it. Now if this were the end of the story that would be bad enough but unfortunately it gets worse. In her desperation, the lady turned to yet another company she found on the internet. She went through her details again, however this time they asked her for her debit card details to verify her identity…I am sure you can fill in the rest of the blanks.

By the time she got around to us to apply for a loan, not only was she upset and angry, she was also completely mistrustful of any company purporting to offer loans and finance. In her eyes, every loan company offering guarantor loans is just a scam and if you had been through what she had then I am sure you can see where she is coming from.

So to summarise, she has spent £140 and still has no loan to show for it and these two firms are still trading with little concern for the authorities.

But here is the rub…

We must come across at least 4 or 5 stories like this every week and the problem most definitely isn’t going away and if anything, with the advent of these so called ‘membership clubs’, you could argue that the situation is getting worse. So how do you avoid falling into these scams? Take a look at our tips below and you shouldn’t go far wrong.

1. Check that firm you are dealing with has a Consumer Credit Licence. You can check by visiting the OFT Public Register.
2. Check that firm is licensed to hold customer data. You can check by visiting the Data Commissioner.
3. Do not deal with any firm that does not place their full business address (not a PO box) or contact telephone number on their website.
4. Do not deal with anyone who calls you from overseas as they are not governed by our laws, rules and regulations.
5. Do not ever give your credit or debit card details to anyone you speak to on the phone and be aware of these common excuses that they use:

We need it to verify your identity.

We need it to release your money

We need it to arrange your loan payout

We need it to pay for bank costs to transfer your money

We need it so you can join our membership club where you will get money                         off coupons, discounts, etc

As stated previously, they are all ruses to get hold of your money.

So what should you do if you have (although after reading this you shouldn’t!) fallen victim to the upfront fee loan companies? Well, the first thing you should do is write or telephone the Office of Fair Trading and also write to your local Trading standards. The reason we suggest you write or email is so that you have a trackable audit trail of your correspondence with the various organisations.

Also, you should keep a copy of every email or text message from the loan company charging you an upfront fee so you can produce it as backup to your complaint. The more that people complain and show documented evidence of what is happening, the better it will be as it will be much easier for the Office of Fair Trading (OFT) to go after these firms and if a firm is found to be continually flouting Consumer Credit laws, or worse, acting fraudulently, the OFT will have no hesitation in removing their credit licence which will prevent them from trading legally in the UK.

We thought the upfront fee charging issue had gone away but unfortunately, due to the increasing popularity of guarantor loans, the guarantor loan application process is now suffering from the same issues as other areas of unsecured lending which is why people need to be more vigilant.

As we have mentioned before, we have absolutely no issue with loan firms charging a small administration fee as long as that fee is reasonable (up to you what you deem reasonable but we would suggest no more than £20), warranted (is there work for the loan broker to do? Searches to pay for? References to send out for? Telephone calls, text messages and emails to make?) If so, then a small charge of £20 could certainly be considered reasonable. However if the loan broker simply passes your details on to another firm and does nothing to help facilitate the loan, then how can any fee be justified?

We accept that loan brokers have a poor reputation and in many cases it is justified but for those loan brokers that genuinely try and obtain a loan for their client (a client who appears to meet the documented lending criteria set out by the lender) then a small fee can be justified as they will have costs to meet. However, where it is found that the client never had a chance of meeting the lending criteria then (in our opinion) that fee should ALWAYS be refunded because if the loan company undertook proper due diligence in the first place then the loan application would never have gone forward. It is a sad reflection on the state of our nation that the people most likely to be charged an upfront fee are those who are least likely to afford it but again, most loan companies who charge an upfront fee care little about the welfare of their client.

And finally, make sure that you have considered all of your options in regards to applying for a loan or finance. It is not always set in stone that your local bank or building society branch will turn you down, particularly if you already bank with them and it is definitely worth a chat with them first before surfing the web to look for a loan. If this doesn’t work, it may well be worth asking a member of your family (that you know has good credit) to see if they are able to get a loan in their own right and if they can, arrange it so that they lend you the money and you pay them back via direct debit or standing order each month. This is often the cheapest way to borrow money but of course, the person taking the loan out will have to trust the real borrower implicitly and this is why guarantor loans are so popular because they offer a similar scenario without the guarantor having to get directly involved in the loan itself (by directly involved we mean as a party to the loan that will show up on future credit searches)

So in summary, a guarantor loan can be a great way to get a loan if you have bad credit but make sure that you do not deal with any company that wants to charge you an upfront fee because there is simply no need for them to do so. In fact, make it the very first question that you ask any prospective loan company as this will avoid you wasting any of your valuable time.

Why indeed? If a guarantor loan is unsecured then surely there should be no need for the guarantor to own their house because the loan will not be secured on the property anyway?

Again, absolutely right but let us explain.

The reason that most guarantor lenders insist that the guarantor is a homeowner is not because of securing the loan on the house, it is simply a case of traceability. If an applicant decides not to pay the loan then the responsibility falls onto the shoulders of the guarantor and it is much easier to trace somebody who owns their house simply because you cannot just up sticks and leave the same way you would if you were a tenant. then, if the guarantor also decides not to pay the loan, the lender can place a County Court Judgement (CCJ) on the individual at the house that they own. This means that when the house comes to be sold in the future, the guarantor must repay the CCJ out of the sale proceeds.

So as you can see, a guarantor loan is till an unsecured loan, it’s just that that being a homeowner gives the lender more comfort that they will be able to find the guarantor in the future (whenever that may be) to nsure that loan is repaid.

It is much harder to get a loan if you do not have a guarantor, however we have a number of options available so all you have to do is give us a call and we will search the market for the right loan for your circumstances.

Yet there is no need to be worried because in simple terms, a credit score is just a more automated way for lenders to assess an individual’s application for credit. The data from a credit score is provided by one of three credit reference agencies in the UK. They are:

• Equifax
• Experian
• Call Credit

In a nutshell they each provide a snapshot of an individual’s current and previous credit commitments and most importantly, how you have managed each of your credit agreements. For example, it will list defaults, CCJ’s and also show any arrears or missing payments. It will also trace you at your previous addresses.

It will provide a credit score which will indicate how much a lender can lend to the individual. When the underwriter has all of this information, it allows them to assess how likely you are to repay (or not repay!) the loan. In the case of a guarantor loan, ONLY the guarantor will be credit scored although the applicant will be credit searched.

And that is it really. Of course, the mechanics behind the scoring process are vast and complicated but from a potential borrowers point of view, it is really a case of assessing the likelihood of the loan being repaid.

The key to all of this is this question:

Do you have a guarantor?

If the answer is yes then of course you can apply for a guarantor loan. If the answer is no then you will need to apply for one of the other types of loans. They all have different criteria which means that with some of them you need to be a homeowner and with others, you can simply be a tenant.

Either way, it is important you understand that you will be taking on a financial responsibility and that it is vitally important that you repay the loan on time every month, regardless of the fact that you already may have a poor credit profile and history of no repayment. It is illegal to take a loan out with no intention of ever repaying it.

In terms of the rates and APR’s charged, they vary from loan product to loan product but suffice to say that the APR on a loan is usually higher for a loan taken over a short amount of time, hence why payday loans usually attract much higher APR’s (some of them are in excess of 3,000%!!)

If you need a loan, with or without a guarantor, then please call us on 0151 343 3791 or email us enquiry AT  anytypeofloan. co. uk

The simple answer to this question is no, a guarantor loan is not secured on property even though the guarantor must be a homeowner.

Confused? Let us explain why this is.

Although a guarantor loan is an unsecured loan (this means there is no asset for the lender to fall back on if the borrower doesn’t repay the loan), all lenders in this market insist that the guarantor must be a homeowner (i.e.owned outright or with a mortgage) so I guess many people are wondering why this is the case if it is unsecured?

The problem with unsecured loans is that mos of the applicants who apply for a loan are tenants, either private or council and the nature of a lot of these applicants is that they move about quite a bit so if they do decide they cannot or will not repay their loan, it can be quite hard to trace them if they decide to up sticks and leave. So, if a guarantor is a homeowner as opposed to a tenant, it would be much harder for a guarantor to move on quickly if they were also trying NOT to repay the loan (obviously this only happens when the applicant has absconded from their responsibilities) and this is why a guarantor must be a homeowner as it offers the lender a far greater possibility of the loan being repaid.

We get asked this a lot and the answer is really simple, it’s just that in the world of loans and finance we try our best to confuse people with jargon

An unsecured loan is the opposite of a secured loan in that the loan will be offered to an individual without that individual offering anything to the lender in return. That means if the borrower decides not to repay the loan then the lender has no other course of action to get their money back apart from issuing a County Court Judgement (CCJ) or default. That is why the loan is known as unsecured.

A secured loan on the other hand allows the lender to take a borrowers home as security so if they decide not to repay the loan then the lender can (in the most extreme circumstances and when all other avenues have failed) to take or reposess the borrowers property and force a sale whereby the sale profits will be used to repay the debt and any monies left over will be given back to the homeowner(s). Because this type of lending offers lenders more security, you tend to find that the rates are keener and that certain levels of bad credit are acceptable.

Of course if you do have bad credit and you are not a homeowner then a guarantor loan will fit the bill instead.

Both parties to the loan (the guarantor and the applicant) enter into a legal contract which ensures that if the applicant defaults on the loan, the guarantor will take over the repayments.

Loans can vary in size and they can be used for any purpose such as a guarantor loan for consolidating debts or a loan to buy commercial equipment.

Most people think that applying for a guarantor loan is easy and that once you have found a guarantor (who is a homeowner) willing to endorse your loan application, then that is all there is to it….complete a credit score and away you go.

Unfortunately not.

It is essential that the nominated guarantor is aware of what they are getting themselves into because their responsibility to the loan is a huge undertaking on their part and they need to be fully aware of all the facts, figures and other essential information before they commit to signing their name (and all of the legal loan documentation) because their obligation to the loan will last as long as the loan term, so if it is a 5 year loan term then the guarantor is responsible for the total loan amount (including lender fees and interest) for the full 5 years.

That is the most important point however there are other considerations to take into account.
The guarantor must have a reasonable disposable income, one that can be proved by way of payslips, bank statements or accountants verification because if the repayments of the loan fall onto their shoulders, they must have a means to repay the loan each and every month. Where this becomes an issue is this: The guarantor may (for example) have no other income other than a small pension (private or state) and whilst this may be enough to satisfy the rule on the amount of disposable income they have left, it could still potentially put the guarantor into a hazardous position financially if they had to take over the repayment of the loan.

And there is the rub.

A guarantor is there to provide financial assistance or back up to the borrower and to give the lender more comfort that the loan will be repaid in the event that the borrower cannot. However, not very individual who is nominated to support the loan will be in a position to do so, regardless of the fact that they may have met the lending criteria. It is one thing saying you will step in and take over the loan when you sign the forms at the beginning but it is quite another to actually do so, as many guarantors have found out to their cost.

So in summary;
Guarantor loans can be a fantastic way for someone with a less than perfect credit history to apply for a loan but it is important that the person you nominate as your guarantor for the loan is fully aware of the facts and their role in the loan application. If someone is unsure about whether to do it or not then our advice is simple…don’t.