Responsibilities of being a Guarantor
Below we outline what it means to be a Guarantor and what responsibilities go with being a Guarantor.
We hope you find all the information you need on this page, but if you have any further questions about your role and responsibilities, please call our team on 01603 369 100
If you’d like an explanation of some of the terms used here, you can visit our Glossary Page.
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.
We will collect 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. Payment will be taken by direct debit.
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.
The additional interest will become due at the end of the loan term and could be a large amount. To avoid this additional interest building up, the Borrower can make a smaller payment before the first direct debit payment, or during the early weeks of the loan.
The remaining monthly payments will then be due on the same date each month, for the rest of the loan period.
What circumstances may give rise to us calling upon you?
As Guarantor, you may get called upon to make payment if the Borrower is unable to make full payment or only makes part payment.
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 or unforeseen increase in costs.
As you know the Borrower personally, you probably know whether they will choose to pay us, or not.
During the life of the loan, the Borrower may experience a key life event such as redundancy, illness, a reduction in income or even death.
In each case you would be responsible for meeting the monthly repayment until the Borrower is able to resume payments to us, or until the loan ended.
So, please be sure this is a commitment you are willing to take on and that you could afford to clear any arrears and make the monthly payments as they fall due.
If you are unsure about being Guarantor, call us at once to cancel the Guarantee and Indemnity Agreement.
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.
However, if the Borrower doesn’t bring their loan account up to date immediately, we will let you know.
Prior to the loan being in default, which is two payments in arrears, we will approach you to make payment on a voluntary basis, 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 not paid earlier, this additional interest will become due at the end of the loan term. It may take longer to repay the loan.
If the loan 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 cannot enforce the debt until after a default notice has been issued.
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” and make a formal demand for payment from you.
The default is not recorded against you at the credit reference agencies however, it could mean that the Borrower may have difficulty in obtaining credit in the future and that any credit may be more expensive.
If you make payment to us, you can use a debit card, credit card or our online 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 may start court proceedings against either the Borrower or you or both of you. Any legal costs we incur will be added to the loan.
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 your home or your Borrower’s home however your home is not at risk.
A charging order means that before the property is re-mortgaged or sold our total debt would need to be repaid from the proceeds.
If granted, a charging order is for the loan balance, all interest and charges added to the account plus the cost of any legal proceedings.
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.
In the future, If you or the Borrower wants 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.
Guarantor loans are not designed for short term lending and so if you choose to settle the loan early in the term, it is unlikely the balance will have reduced by very much.
UK Credit does things differently to some guarantor lenders, so please note:
- We will never take money directly from your bank account (without your consent) if the Borrower doesn’t pay,
- Being a Guarantor will not appear on your credit file,
- The loan is unsecured so your home is not at risk of repossession,
- We’ll keep you up to date on the status of the account for the whole term.
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 you change your mind and you wish to withdraw as Guarantor, you must give us notice before the main agreement has been made and the loan is completed.
If the Borrower changes their mind, they can withdraw from the loan agreement during the 14 days after UK Credit confirms that the agreement has been completed. The Borrower can withdraw from the loan agreement by telling UK Credit as described in the agreement.
If the Borrower wishes to cancel the credit agreement, the total amount borrowed must be repaid within 30 days of the Borrower telling us about the withdrawal.