Responsibilities of being a guarantor
At the heart of our lending is the guarantor; having a guarantor by their side means our borrowers are able to borrow and we are able to lend to them.
Below we outline what it means to be a guarantor and what responsibilities go with being a guarantor.
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Watch our Chief Executive, Andrew Turner, in our informative video or scroll down to read the script below.
If you are willing to act as a Guarantor in respect of a loan with UK Credit Limited, you will be asked to sign a Guarantee and Indemnity Agreement, this is a legally binding contract. If you do not meet all your obligations under it we can take legal action against you to recover any money due. So, before we complete the loan, we would like to give you some important information to help you decide whether to go ahead with this agreement.
What happens when we complete the loan?
On completion, we will, as a security measure, and to ensure that you are fully aware of the loan offered, transfer the funds to your bank account. You will need to transfer the money to the Borrower. Only do so if you are happy to be the Guarantor of the loan.
We will collect by direct debit the first payment from the Borrower one month after the loan is completed, unless they choose another day in the month for their first payment.
If the first direct debit payment is made more than one month after we complete the loan, additional interest will be payable (as the loan agreement assumes that the first payment will be made one month after the loan completes). As this interest will accrue, and be added to over the life of the loan, it could be a large amount. Unless it is has been paid to us before it will become due at the end of the loan term.
The remaining monthly payments will then be due on the same date each month, unless the Borrower has requested it to be changed, for the rest of the loan period.
What circumstances may give rise to us calling upon you?
The main reasons that borrowers don’t pay us are that either they choose not to pay us or because they experience a life event that means they can’t pay us because of reduced income. As you know the Borrower, you probably know whether they will pay us if they can. If you are unsure, call us at once to cancel the Guarantee and Indemnity Agreement.
If the Borrower experiences a key life event such as redundancy, accident, illness, a cut in working hours or income, the end of a relationship or even death they may not be able to pay us for a while, until they find a new job, for example, or even for rest of the period of the loan if, for example, they were unable to work say due to illness.
In each case you would be responsible for meeting their monthly commitment until the Borrower is able to resume payments to us.
This might mean you making all of the rest of the payments needed to pay off the loan. Or, you may choose to repay the loan. So, please be sure this is a commitment you want to take on and that you could afford to clear any arrears and make the monthly payments as they fall due.
What happens if the Borrower does not pay?
If the Borrower doesn’t make a contractual monthly payment when due, we will contact them promptly and see if they are able to make payment. If they make payment at once we will not disturb you for what is likely to be a simple oversight by the Borrower.
However, if the Borrower doesn’t bring their loan account up to date immediately, we will let you know. Late payments or missing payments will increase the amount of interest that must be repaid. It may then take longer to repay the loan. We won’t demand payment from you, but you can choose to make payment to bring the account up to date, and so avoid any more interest accruing on the amount overdue.
If later the loan then falls the equivalent of two monthly payments overdue, we will normally then issue a “default notice” to the Borrower and send you a copy of this. We will then wait one month to see if the arrears are reduced. If not, we will tell the credit reference agencies about the ”default”. This could mean that the Borrower may have difficulty in obtaining credit in the future and that any credit may be more expensive.
At this point the default notice will have expired. We will then contact you, and demand payment, which you will be liable to pay. You can pay us by debit card, credit card or via our on-line portal. We will not take money from your account without your consent.
What happens if you don’t pay us when you are legally required to?
If we are unable to collect payments from either you or the Borrower we will start court proceedings against either the Borrower or you or both of you.
These legal proceedings may result in us being given a County Court Judgement against one or both of you. This could lead to a charging order being placed over any home you or the Borrower may own. Any such charging order will be for the loan balance, all interest and charges added to the account and the cost of any legal proceedings. Your home is not at risk, but a charging order means that when the property is re-mortgaged or sold our total debt would need to be repaid from the proceeds.
We may also apply for an attachment of earnings order under which the courts order that your employer makes payments to us via deductions directly from your pay.
If the Borrower or you decides to settle the loan early you can do so. As an approximate guide, the cost of early settlement is the balance at that time plus two months interest.
If you have any doubts about entering into a commitment please call us for more information or get independent legal advice from a solicitor. If you are still in doubt, please tell us immediately and we won’t complete the loan.
If we complete the loan and the Borrower or you then change your mind, the Borrower or you can withdraw from the loan agreement during the 14 days after UK Credit confirms that the agreement has been completed. The Borrower or you can withdraw from the loan agreement by telling UK Credit as described in the agreement.
If the Borrower or you wish to cancel the credit agreement, the total amount borrowed must be repaid within 30 days of the Borrower or you telling us about the withdrawal.