So why is there sudden interest in guarantor loans?

Well the answer is pretty simple; From a lending perspective, unsecured lending is by far the riskiest of all lending products because it offers no security to the company providing the finance and if the borrower ever did get into difficulties in terms of repaying the loan, it would be very difficult for the lender to recover that money in full. The reason for this is that a lender can only apply pressure to the borrower to repay the loan, however, if the borrower decides not to repay the loan (for whatever reason) there is not a great deal the lender can do about it. You can see more information if you visit guarantor loans faqs.

That is why lenders are tending to move away from traditional unsecured loans as the risks are just too great. Of course there are lenders such as high street banks who are lending and will continue to do so, however they only really lend to ‘vanilla’ clients, ie. borrowers with almost perfect credit histories and of course, post the credit crunch, lots of borrowers are now considered to be ‘sub prime’ so there is even less chance of a borrower obtaining a loan from those sources.

So why is a guarantor loan a better solution?

They are from the lenders point of view because they offer them a greater chance of getting their money back if the applicant / borrower defaults on the loan. This is because if the borrower doesn’t repay the loan for any reason then the lender has recourse to go to the guarantor in lieu of payment. Of course, the lender will not go down this route automatically as they always try and recover the money from the applicant first and give them plenty of opportunities to make a payment, however, if they have to then the lender will approach the guarantor for repayment.

This type of guaranteed loan is an ideal product for lenders because it offers them the security of repayment and in some quarters, guarantor loans are known as sub prime loans to prime borrowers because the borrower is usually classed as a sub prime applicant and the guarantor is usually classed as a prime applicant. This allows people who would not normally qualify for a regular high street loan to get a loan when all other avenues have proved fruitless and whilst the interest rates and APR will be higher for this type of loan, it is still a viable alternative for those millions of UK borrowers who do not fit the traditional high street lending model.

The main point is that all guarantors must be homeowners so regardless of whether they have a great job earning thousands of pounds each month, the loan cannot proceed without the guarantor owning a property. Now they can live in rented accommodation as long as they own (a mortgage is fine) another property such as a Buy to Let but it is essential that they do have a mortgaged property.

It is also important that the guarantor has maintained their mortgage payments as it is unlikely that a guarantor will pass a credit score if they haven’t. So, getting a guarantor loan isn’t that difficult as long as you are aware of the main criteria points.

Of course, just because a guarantor loan allows an applicant to have bad credit does not mean that they will be accpeted for a loan. The criteria that every guarantor lender works to has to take account of something called ‘responsible lending’. This means that individuals must be able to demonstrate that they have the financial means to pay for their new loan and not be in a worse position financially if they were to take this loan out. Unfortunately, there are lots of brokers and lenders who don’t abide by this ethos meaning that a lot of loan applicants have applied for a loan without any real strategy on how to pay the loan back. This will simply lead to heartache and you can almost guarantee that these borrowers will fall into difficulty. You can read our guarantor loans FAQs here.

So, assuming that we are happy that the applicant can afford to repay their loan, the real assessment of whether they can have it will be decided by the credit score that the guarantor achieves.If they achieve the highest credit score available then they will be able to get a loan of £7,500 whereas most companies restrict borrowing to £5,000.The great thing is that most of these loan applications will pay out within 24 hours of all of the paperwork being received.

So, whilst the applicants credit status is important, it is nearly always about the guarantor.

We have been specialising in Guarantor Loans Online since 2008 making us one of the longest standing guarantor loan companies in the UK. We pride ourselves on our customer service and we will go the extra mile for our customers and…We will not sell your details on to anyone else meaning that you will not be bombarded with endless telephone calls, emails and texts as you would with other loan companies. If we cannot help you then that is it…we will not try and sell you anything else and you can sleep safely at night knowing that your details will not have been sold to anyone else.

Our guarantor loan service is quick, efficient and a real no hassle way to get a loan quickly. Apply online for a guarantor loan today and we will give you a decision instantly.

Now, critics of debt consolidation loans say that they only exacerbate the problem because they are simply adding to the individual’s debt; our view is that if a new loan repays the existing payday loans and lets the borrower have more disposable income each month (because a loan taken over a longer period will result in lower monthly repayments although be aware that the overall amount to pay back will usually be greater) then that can only be a good thing for individuals who have zero disposable income each month.

It’s all very well saying don’t take on new debt but what is a person to do if the loans they are currently repaying cripple them financially to the degree they have no cash left each month after paying these loans back. That can’t be right can it? We agree that a guarantor loan maybe isn’t a long term solution but to the borrower who is stuck on the payday loan credit cycle and can see no way out of it, it maybe a short term fix for their immediate problems of paying for food, fuel, clothing, etc.

As an example; A lady has 7 payday loans totaling £700. She has now spent the money and is in no position to keep rolling these loans over each month and anyway, it is costing her £105 every month just to do this. In a few months, the payday lenders will stop her rolling the loans over anymore and the loans will start having to be cashed each month. So, if in 2 months one of the lenders called for their £100 she would have to repay it AND still keep rolling over her other loans at a cost of £90 each month. That is £190 she has to repay and this will go on until a few of them will be repaid and at that point, this lady may be in such a state financially that she may have to start the whole payday process again.

Now, in this case, who still thinks debt consolidations are always a bad thing?

When you apply online to a guarantor loan company there are a number of things you should be careful about. They are:

• Providing your card details.
  • This applies even if the loan company asks you for your card details ‘to prove your identity or confirm you have a bank account’. There is absolutely no need for any loan company to require your debit or credit card details.

• Agreeing to join their ‘club’.
  • This is where they ask you to pay a one off membership fee to join a club which gives access to money saving offers, vouchers and other ‘freebies’. This will also include searching for a loan for you (note the use of the term ‘search for a loan’ and not ‘provide you with a loan’. The fact is that you can join plenty of money saving, voucher and discount clubs at no cost whatsoever so again, there is no need to pay a fee to join such a club.

• Paying a ‘release or approval’ fee.
  • This is another common reason that loan companies use to get people to pay an upfront fee. They make it appear that the loan is ready to be paid into the applicant’s bank and that all they need to do this is a ‘fee of £79’ to release the funds only to find (in many cases) that no loan is forthcoming.

The bottom line is that loan companies do not have to charge clients an upfront fee because they get paid a commission by the lender they place your case with. So the next time you apply for a loan online make sure that you do not give them your card details otherwise you may fall into the upfront fee loan trap.

Of course we will continue to focus on guarantor loan but we will also be moving into car finance, payday loans, secured loans and commercial finance in a big way and we have no doubt that the changes will have a positive effect on our business and of course for our customers who continue to keep coming back back to us for unbiased loan advice and no upfront fee loan products.

Watch this space!

This situation is compounded when the loan broker cannot find you a loan and in many cases, potential borrowers should never have been charged in the first place because they are not working or are just receiving benefits. Then when the individual concerned tries to get their money back, they can’t as the loan broker will not reply to emails or telephone calls.

The Consumer Credit Act limits a credit broker’s charges to £5 if, following an introduction to a lender, an agreement is not signed within six months. If more than that has already been paid, brokers must refund the excess on request.

You can find the full details here on the OFT website which also includes a guide on “Right to recover broker fees”.

The problem is becoming so widespread that the Citizens Advice Bureau also publish guidelines of their own and are in contstant contact with the OFT. Further information can be found here at Citizens Advice on Credit Brokers and Intermediaries.

• Interest rate
• Lender administration fee
• Documentation fee
• Guarantor criteria (age, income, etc)
• Applicant criteria (age, income, ability to repay,etc)
• Product terms, conditions and other key points

As part of this process, we will also list those firms that do not charge upfront fees to clients as this is one of the most controversial and unfair practices in the unsecured loan industry and yet it shows no signs of abating and more and more people appear to be getting scammed each week.
The other part of the guarantor comparison site will be the ability to contact those firms listed directly from the site so if you find a loan broker who has a particularly appealing guarantor loan product, you can contact them directly by completing a simple online guarantor loan enquiry form.

It is designed to give the potential borrower an indication of the overall cost of the debt (loan) you are taking on so with a guarantor loan for example, the APR will consist of the annual interest rate and other charges such as lender fees, admin fees and/or broker fees. The final APR rate will then allow you to compare the loan to others on the market.