*Representative Example £3,000 over 3 years, representative 48.9% APR fixed. Monthly payment £145.17. The interest is 10% per annum fixed and service fee is 30.48% per annum fixed. Interest payable £549.95 and service fee payable £1,676.17. Total repayable £5,226.12
Not everyone has a guarantor who is a homeowner we explain if there are any other guarantor alternatives.
Just a few years ago, you might have been hard pushed to find anyone who knew about guarantor loans. Now, they’re quickly becoming one of the most popular forms of borrowing for those with a less-than-perfect credit history in the UK. This is because they utilise an old-fashioned way of lending, where a friend or family member vouches for the borrower’s ability to pay the loan back, and agrees to pay any instalments which are missed. This extra layer of security for the lender allows the main applicant to borrow more money than they may usually be approved for at a lower rate (of course, the best guarantor loans come from lenders who will check affordability before agreeing to lend the money). The manageable monthly instalments gives them the opportunity to build up their own credit history, meaning that they may not have to rely on a guarantor the next time they want to borrow higher amounts of credit (typically from £1,000 to £5,000).
Traditionally, guarantors for loans like this would have to be homeowners, but now tenant guarantors are being accepted by a variety of lenders. This means that, should you want to borrow from a guarantor lender, you can use a friend or family member who rents their home – something which a huge percentage of people do. This gives you more choice when it comes to finding a guarantor for your loan.
Tenant guarantor loans work in the same way that homeowner guarantor loans do, except that the tenant guarantor may be asked some additional questions for security reasons. The reason why homeowner guarantors were traditionally favoured is because it is easier to confirm their identity and their financial stability if a property is involved. Now that credit files are detailed and easy for lenders to check, and owing to the fact that renting now makes up a large percentage of the housing market, tenant guarantors are also accepted by some guarantor lenders. Some lenders have been offering tenant guarantor loans for a while, whereas others – such as Guarantor My Loan – have just started opening their lending up to cover this.
How long a guarantor lender has been accepting tenant guarantors does not matter. Instead, the most important thing to consider when looking for a lender who will do this is whether they’re committed to Treating Customers Fairly. This is a way of working which puts the customer first, ensuring that those with vulnerabilities or those who would not be able to afford the monthly installments are not given credit in the first place. This not only protects the lender from loss, but it also prevents people from getting into financial trouble and having to call on their guarantor to pay the loan.
The best guarantor loans for those who cannot find a homeowner guarantor are ones which suit your particular circumstances and needs. There is no ‘best’ or ‘worst’ when it comes to guarantor lenders, as each company has their own way of doing things and their own unique deals and benefits. For example, Guarantor My Loan, who were mentioned earlier, are the only guarantor lenders to offer cashback once the loan has been paid off. If every instalment is paid in full and on time for the duration of the loan, then they will give the borrower 1 months’ worth of payments back, no strings attached. It’s little offers like this that you should look out for when deciding on a lender to go with, as you may find it’s a better deal overall than one which has a lower APR (Annual Percentage Rate).
When looking for a guarantor lender who accepts tenant guarantors, it’s important to do a bit of research to find the best deal for you. Many lenders will offer loans to those with a tenant guarantor at a higher rate than they advertise, so it’s important to understand exactly what you’ll be expected to pay before signing on the dotted line. The best guarantor loan lenders will happily give you this information before you have to commit to anything, so try to avoid loan companies who are reluctant to let you know how much you’ll be paying.
When applying for a tenant guarantor loan, it helps to have a guarantor already on board. While it may not always be possible, having one or two ‘back up’ guarantors is also a good idea. This means that if your first choice isn’t eligible for some reason, then you can ask others without wasting too much time.
Before you begin applying for a guarantor loan, it’s always good to set aside some time and gather personal documents, like your passport or driver’s licence, as you are likely to be asked for proof of identity. A full breakdown of your monthly finances may also be asked for, so it’s useful to know how much you’re spending on certain things each month, such as rent/mortgage payments, bill averages and entertainment spends. You may be asked to answer questions about whether your financial situation is set to change within the next few months, so be prepared for questions like these and always answer to the best of your ability.
Having your guarantor with you or at least easily contactable while you apply is also a good idea, as they will also need to fill in an application which is connected to yours. They will also need to speak to the loan company so that they can be sure that your guarantor understands their responsibilities and what may be asked of them should something go wrong with the payments on the loan. As long as both of you fill in the application honestly and are happy that the loan is affordable, then your guarantor should not have to pay a penny.
Guarantor loans are applied for online, rather than on paper, via application pages like this one. The process is generally quite quick if you have a suitable guarantor on board already, and you can usually get your money within 24 hours of a completed and approved application.
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Guarantor My Loan is a Peer to Peer lending platform that matches those wanting to lend with those wanting to borrow.
We specialise in arranging Guarantor Loans for customers and have been lending since August 2014.
You can visit our Lender FAQs to find out more about lending on our platform and how to become a lender. If you have any further questions please call us 01603 561110.
You can visit our Borrow FAQs to find out more about borrowing on our platform and to start the application process visit our apply page. If you have any further questions please call us 01603 561110.
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