Introduction to guarantor loans 
 Since their arrival to the subprime market back in 2005, guarantor loans have gradually grown in popularity. At first, there was only 2 or 3 legitimate lenders offering this product however as time has gone on more providers have entered the market meaning there is now more choice for the consumer.

If you’ve decided that the guarantor loan product is the one for you then you next need to decide which lender to go with. One thing that you will notice is that the core product offered by the lenders is very similar; it’s just that there are various details of the product that may differ.

In order to gain the edge on their competitors, lenders will tweak their product in a hope to make it more attractive to consumers. Here are some things that lenders may tweak:

Loan Amount 
When guarantor loans first launched lenders would only offer between £1,000 and £3,000. However as time went on and the need for the product grew, lenders started to offer up to £5,000 and some even introduced a £500 small loan product. Nowadays though, the largest amount available is £10,000 which is repayable over a term of up to 72 months (6 years) however the average loan amount size remains at around £3,000 to £4,000.

APR and Interest Rates 
One of the most effective ways of gaining the edge on competitors is by offering lower rates. Generally, 50% APR has been the industry standard for lenders entering the market however as time has gone on some lenders have dropped their rates to around 45% or lower. As we’ve seen from the personal loan market, a price war can pick up speed very quickly so don’t be surprised to see these rates drop even further in the future.

The Process 
Historically, the guarantor loan process was pretty clunky. There was a lot of paperwork involved and it would take a number of days for the lender to offer a decision regarding the approval of the loan. Nowadays though, the majority of lenders offer a 100% online application process meaning there is no manual paperwork involved and the loan can subsequently be paid out the same day.

The checks involved in the guarantor loan process also differ. Some lenders will not carry out credit checks on the applicant, while others will. The majority of lenders will carry out some form of affordability check to ensure that the applicant can afford the repayments of the loan alongside all current credit commitments.

The Applicant and Guarantor Criteria 
Each lender will have their own desired criteria which both the applicant and guarantor must meet in order to be approved for a loan. In general, the applicant criteria will be relatively flexible; they will be required to be over the age of 18 and in receipt of a regular income. The guarantor criteria will be stricter though; they will be required to have a good credit history, own their own home (although some lenders may now be able to accept tenants as guarantors) and be in receipt of a regular income that is sufficient to afford the repayments of the loan, alongside all current credit commitments.

Conclusion 
There is no right or wrong in terms of which lender you should apply with; each will have their benefits and drawbacks. Deciding which is most suitable for you will be dependent upon your expectations and needs. If you’re looking to get the cheapest possible repayments then go for the lender with the lowest APR, if you’re more concerned about applying with an ethical lender then go for the one that offers the most personal service. Just ensure that when you do apply; you are applying with a direct lender and not a fee charging broker.

Buying a new car (or one that’s new to you, anyway) can be an exciting time, especially if you’re treating yourself to something a bit nicer than what you’re used to. You may even be splashing out on your very first vehicle, in which case, you’ll be keen to get a good deal. Car finance can be a tricky thing to work out, particularly when there is so much to take into account. Many people who have been turned down by the mainstream lenders tend to gravitate towards guarantor loans, as these are a good ‘middle ground’. You can get higher funding (up to £7,500) at a more reasonable rate than other lenders aimed at those with a less-than-perfect credit history.

Get more car for your money One of the first things you should do is to shop around for the right car. Just because you have the funds to buy something straight away, doesn’t mean that this is always the best bet. You should take your time and work out the running costs, as well as any other factors that may be important to you (such as room for a child’s car seat, a large boot space etc.) before making a decision. Try to make your money go as far as you possibly can. This way, you’ll spend less, get more, and make your credit work for you. You may find that you don’t need to borrow as much, which could see you paying off the debt much sooner than you thought you would.

Think about total monthly costs When looking at how much you’ll pay for your guarantor loan each month, you should also think about your increased costs that are related to car ownership. Insurance payments, petrol, parking costs and car tax etc. will all add up, so you should make sure that all of these new payments are covered. If you’re used to spending a huge amount on public transport, then the cost of this will offset some of your new costs. All the same, you should sit down and work out your extra expenses as accurately as you can – this will help you with the ‘income and expenditure’ check that the guarantor lender may do as part of your application.

Find a responsible guarantor Finding a responsible guarantor is important, as they will help you to get your application accepted by the lender. If you don’t have a guarantor, then you cannot be approved for a loan. This is because the guarantor (who could be a close friend or family member, like a parent or sibling) acts as a ‘boost’, raising your credentials so that they fit in with the lending criteria for these higher amounts at better rates. Their signature on the application means that they personally vouch for you to pay, and if you don’t, then they are agreeing to pay for any instalments you cannot meet. It’s rare that a guarantor ever has to pay anything, so as long as they’re happy with the arrangement, and trust you to meet each payment in full and on time, then you should be good to go. 

Introduction 
 Whether you’re applying for a loan, mortgage, credit card or current account it’s important that you fully understand the application process and indeed the terms involved.

You’re probably reading this due to the fact that you’re either searching for information about guarantor loans or you’re preparing to apply for a guarantor loan. Whatever your current situation, we think this article will prove helpful to you going forward.

We’re going to outline 6 of the top guarantor loan related terms and discuss what these mean and when they might be used during the application process.

1.     APR 
Prior to even applying it’s likely that you’ll see the term APR on a company’s website. APR stands for Annual Percentage Rate and will be expressed as a percentage of the total yearly interest rate. The best rate loans will be around the 5% mark, guarantor loans will be around 50% and payday loans will be around 2000% APR.

2.     Bad Credit Loan 
Guarantor loans are often described as a type of bad credit loan. This basically means that guarantor lenders may be able to accept those with a bad credit history, i.e. those who have missed payment and defaulted on credit commitments in the past.

3.     Debt Consolidation 
One of the most popular uses for guarantor loans is debt consolidation. Debt consolidation is the act of using a single item of credit (such as a credit card or loan) to pay off multiple items of credit. Consolidating debt into one single monthly repayment is a great way of getting your finances organised and more manageable.

4.     Guarantor 
One of the conditions of guarantor loans is that the applicant must provide a friend or family member to stand as guarantor. The guarantor simply supports the application and guarantees to pay the monthly repayment should the borrower ever fail to do so. 

5.     Supporting Documents 
Occasionally during the guarantor loan process, lenders will ask you to provide some supporting documents. Often, the automated ID, address or income validation checks will fail to return conclusive results meaning the lender will require you to provide documents to support the application. This could include proof of ID (a passport or driving license), proof of address (a recent utility bill) or proof of income (a bank statement or payslip).

6.     Underwriting 
If you do decide to go ahead and make an application for a guarantor loan then one term you may come across is underwriting. This is basically the term used to describe the processing over the loan application. Underwriting checks that may be used during the process include: affordability checks, credit checks, income validation checks, job checks and security checks. Providing you pass the underwriting checks then there’s a good chance you’ll be approved for the loan.

Conclusion 
 Understanding exactly what these terms mean will make the application a much simpler process. Going forward we are keen to publish more of these types of articles so if you’d like to see any particular terms added don’t hesitate to put us a comment in the section below.

Guarantor loans may not be a hugely mainstream method of borrowing just yet, but in the past they were extremely popular and in some cases were the only way to borrow. A guarantor is needed by the loan company for the same reason that a letting agency may ask for one – if the loan recipient/tenant doesn’t pay, then the guarantor is asked to do so in their place. Of course, this is a rare occurrence, as many people who sign up to a payment agreement, for either a loan or a tenancy, are likely to pay what they owe. This may be due to general honesty on their part, or through fear of severely damaging their credit rating.

The good thing about being a guarantor is that guarantor loans are ‘vetted’ in a more comprehensive way than other lending options aimed at those who may be turned down by the banks. The checks are in place to protect the lender, the guarantor and the borrower, so it makes a lot of sense, even though it may take a little longer to process the application. Consumers have been spoiled somewhat by the speed in which payday loans can pay out – in some cases you can have the money in your account within 15 minutes. While this is very handy in an emergency, it doesn’t allow the lender to ensure that you’re 1: able to pay the money back and 2: necessarily able to borrow legally (i.e. you’re old enough and a UK national). A guarantor loan can still be in your account on the same day as your application, so it’s not so slow that you won’t be able to use it in an emergency situation.

If you’ve been asked to act as someone’s guarantor, you’ll need to consider whether you trust them to pay the amounts they’ve agreed to, and you’ll need to feel happy with the lender, as they will hold your personal details for the duration of the loan. It’s likely that you’ll be asked to provide evidence that you’re able to afford the loan, as well as your friend. This doesn’t mean that you’ll necessarily need to pay any money; it’s just a standard check to make sure that the lender is being responsible. If they lent the money to people who couldn’t afford to pay it back, then this would not be fair to you or them.

This is part of the reason why being a guarantor is a relatively ‘safe’ thing to do where your money is concerned. The friend that you’re ‘backing up’ will be checked by the lender and they will only accept the application if they’re happy that they can afford their loan. This is good for you, as it’s unlikely they’re going to default on the repayments if the loan is affordable to them.

It’s worth gathering together some evidence of your I.D. and your income, as you may need to produce supporting documents as part of the application process.