The comprehensive guide to guarantor loans


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Chapter 1: Introduction
Chapter 2: Being a guarantor
Chapter 3: How it works
Chapter 4: The nuts and bolts

Chapter 1: Introduction


This is a comprehensive guide about guarantors and guarantor loans. It’s everything you will need to know before making an application. But remember, every guarantor loan provider is different. What you read in this guide is based on our unique criteria.

We think we’re ‘on the money’ when it comes to guarantor loans. We offer some of the best guarantor loans on the market thanks to our attractive terms and competitive rates. Our customers love us too!

First things first – what is a guarantor loan?

A guarantor loan is a loan for someone without a strong credit rating of their own. A trusted friend or family member supports your application and also agrees to make loan repayments if the borrower is unable to do so.

It’s a form of lending based on trust between the lender and the applicant (along with their chosen guarantor). A guarantor loan is perfect for anyone who has struggled to get what they need from a high-street bank due to a bad credit rating.

Guarantor loans are also far cheaper than payday loans and are often the cheapest alternative for people with low credit scores.

Guarantor loans can be used for a wide variety of different reasons, but are commonly used for consolidating debt, home improvements, vehicle purchases or repairs, weddings and holidays.

The great thing about guarantor loans is that it opens up more possibilities. Here at UK Credit, we don’t get hung up on bad credit – the most important thing to us is whether our loans are affordable. Then, all that’s needed is a guarantor to support a borrower’s application. We see it as an old-fashioned way of borrowing money with the trust of a helping hand.

What or who is a guarantor?

A guarantor is a family member, friend or work colleague, who is happy to guarantee the loan for someone they know who needs a bit of financial help. If you have poor credit, applying for a loan with a suitable guarantor might be the only way you can get the funds you need.

Chapter 2: Being a guarantor

The benefits of guarantor loans

  • Guarantor loans don’t require you to have a strong credit rating, while a poor credit rating will prevent you from being accepted for most other types of loans
  • There’s no upfront fees
  • There’s less risk. Unlike some providers, we only provide loans if we think they are affordable for both the applicant and the guarantor
  • Our low APR guarantor loans are unsecured too, which simply means that the guarantor’s home will not be at risk
  • Although it’s not essential, if a guarantor is a homeowner, the borrower will enjoy rates from as low as 29.9% (fixed) and can borrow from £2,000 to £15,000
  • Repayment periods of 18 to 60 months
  • There’s a fast decision in principle

6 habits of a good guarantor

A guarantor will usually be a friend or family member, as they’re the people who will know the borrower best. Here are just a few habits of a potential guarantor…

  1. Reliable: Someone who’s happy to make the payments if the borrower can’t
  2. Reasonably good with money: A person with a good/fair credit history. Most importantly, they haven’t been bankrupt in the past three years
  3. Have a regular commitment in their life: They’re a homeowner or an employed non-homeowner (unlike many lenders we accept non-homers as guarantors!)
  4. Understanding: Here at UK Credit, we understand that some people haven’t had the chance to build up their credit history or have run into a little financial difficulty in the past. A guarantor will be understanding too, as they’re helping someone who is likely to have faced difficulties securing a loan on their own
  5. Transparency about their own financial history: They won’t have a Debt Management Plan or Individual Voluntary Arrangement over the past three years
  6. They’ll have a super-hero streak: Because let’s face it, anyone who has your back is going to be a bit of a knight in shining armour

A guarantor’s job spec

Job title:
Guarantor Extraordinaire: Head of Friends and Family Finance

The candidates:

  • Mums and Dads
  • Friends
  • Siblings
  • Partner or Spouse
  • Brother or Sister
  • Other family member
  • Colleagues

21 to 70 years old at the time of loan pay out

Job overview:
Act as a guarantor to a friend, family member or colleague in need.

Responsibilities and duties:
It’s a straightforward job. Simply provide security for the applicant in order to secure the loan in the unlikely scenario that loan repayments are missed, agreeing to step in to make the payments on the borrower’s behalf. It’s that simple.

Current work situation:
Employed, self-employed (if you own your own home) or retired (providing you can prove income)

Place of work:
Anywhere. Although, due to differences in Scottish law, both you and your guarantor must either both reside in Scotland, or both not.

Working hours:
15 – 30 minutes spread over a day or two: the time taken to complete a short online form, supply information and provide verification to one of our team over the phone.

Job purpose:
To be a financial hero, a friend, an ally.

Chapter 3: How it works

Does your financial history impact your application?

We understand that many of our customers may have had problems in the past, it’s just one of those things.

The borrower’s personal financial history can affect your application. For example, if the borrower has recently been declared bankrupt, are currently in a Debt Management Plan (DMP) or have entered into an Individual Voluntary Agreement (IVA), sadly we will not be able to help.

However, at UK Credit we always take into consideration wider financial circumstances and work with the borrower to make our loans accessible to as many people as possible.

We also take into account the financial history of your guarantor to make sure that they are able to support you and your application.

How to approach a potential guarantor

Here’s some straightforward advice for borrower’s when approaching a potential guarantor…

  1. Start by making a shortlist of your closest family or very good friends
  2. Once you’ve narrowed down your top five, select your preferred guarantor
  3. Face-to-face interaction is always recommended, with most things in life, and especially when asking for support
  4. Ask to meet your potential guarantor about a small favour you’d like to ask. Suggest meeting for a drink, coffee or walk, but ask them where they would prefer
  5. Talk to them openly. You don’t have to divulge all of your financial background but it’s important to explain the reasons why you really need this loan
  6. Be transparent
  7. Expressing your gratitude is a good thing to do but most importantly reassuring them that you will take every step necessarily to keep up on repayments
  8. Then point them to our web site for further information
  9. And feel free to give them our number if they’d prefer to speak to another human about what’s involved, we’re always on hand to help
  10. Lastly, ensure they understand their role and responsibilities, including any potential financial risks if you struggle to make a payment

Timescales of a guarantor loan

There are a number of factors that affect the time it takes to pay out a loan. We do everything we can to make sure you get your pay out the same day. For this to happen, documentation will need to be provided to us promptly, and both the applicant and the guarantor will need to be available for a call.

Although it can vary greatly from customer to customer, rest assured we’ll work as hard as we can to pay out loans as quickly as possible.

The loan application may slow down in the following instances:

  • We need to speak to the borrower and / or the guarantor but cannot get hold of one or either
  • We need something from the borrower like proof of income or proof of residency (these can be sent by email / photo message on telephone)
  • A borrower applied during a bank holiday, a weekend or a particularly busy period

The biggest reason for delays is because we can’t get hold of the borrower or that we’re waiting on paperwork, so please make sure we have all the best contact telephone numbers.

We pay the money into the guarantor’s bank account for two security reasons. Firstly, we do it to ensure that the guarantor is fully aware the loan has been paid out to the borrower. Secondly, we do this to protect our customers and ourselves against fraud.

Chapter 4: The nuts and bolts

How flexible is a guarantor loan?

In short, a guarantor loan is very flexible.

There are no upfront fees and unlike many loan providers, we accept all friends and family, including the borrower’s partner, as a possible guarantor.

There’s the option for the applicant to receive a top-up to their loan, to repay sooner or even settle their balance at a later date.

Early repayments

If the borrower’s wishes to settle a loan balance, we will calculate a loan settlement figure. By settling a loan early, the borrower could dramatically cut the amount that they will need to repay in the long-run.

However, if they choose to settle the loan early, an early settlement charge will be applied – usually around the same amount as two months interest. This will be added to the remaining loan balance.

Top up loan

If the borrower is an existing customer and needs an additional boost to their finances for some other unexpected expense, we may be able to offer the option to top-up their loan through a further advance.

As long as the borrower has kept-up with repayments, they can boost their loan up to a maximum of £15,000. As an existing customer, they may be eligible for a lower rate of interest too!

APR explained

Annual Percentage Rate (APR) shows how much borrowing will cost over the course of a yearly period. It includes the interest rate and any additional fees if there are any. The amount is shown as a percentage of the loan amount. Comparing the APRs of different loan providers is a good way for borrowers to compare loans to make sure they are getting a good deal. APR is calculated using a formula as set out in the Consumer Credit Act (1974) – every lender must follow it.

If you have poor credit, the holy grail is of course to find a low APR guarantor loan.

Fixed vs. variable APR?

When an APR is fixed rate this means the rate of interest charged doesn’t change throughout the period of the loan agreement. Whereas, a variable rate of APR reflects a price that could change, dependant on national rates and economic changes.

For example, many homeowners prefer a mortgage rate that is fixed to the Bank of England’s base rate, which means that if the base rate goes down, they will pay lower mortgage repayments. It’s the same for a guarantor loan.

Benefits of fixed rate APR

  • Assurance: The main advantage of a fixed rate guarantor loan, is of course, certainty. Having a fixed APR on your loan ensures that repayments do not change for a set period of time. This means you can plan ahead and maintain a certain standard of living, which is particularly helpful for those who don’t have much contingency.
  • Budget: A fixed rate means that you retain a low APR, giving you peace of mind that your monthly payments won’t change throughout the duration of your loan period.
  • Committed: If the Bank of England were to decide to lift interest rates in the near future, the borrower will retain the same stable interest rate for their guarantor loan.

Low APR guarantor loans

UK Credit’s low APR guarantor loan offers peace of mind. Not only is our best rate fiercely competitive at 29.9% but all of our guarantor loans are fixed, which means the borrower knows what to expect and won’t experience any nasty surprises. This is of course particularly helpful given the uncertainties surrounding the unpredictable economic climate.

What happens if you can’t pay back your guarantor loan

If you are a borrower and you are struggling financially, don’t worry. If your loan is with us, simply get in touch as soon as you realise that you might be in financial trouble. We’ll be the first to understand that sometimes life doesn’t go to plan. We will always try to work with you to resolve the situation.

If the loan falls into arrears and the borrower is unable to make up the shortfall, this is when the Guarantor is asked to step in. Non-payment may result in further action which could include a County Court Judgement (CCJ), impaired credit rating (which could make obtaining credit in the future difficult / more expensive) or a charging order on your property (homeowners only). This simply means that when the guarantor decides to sell their home, once funds from the sale of the home have been released, your solicitor will be obliged to execute the order and we will be sent the balance owed.

5 guarantees with a UK Credit guarantor loan

  1. It’s a quick way to secure the funds you need with a fast decision in principle
  2. There’s no upfront fees
  3. Our loans are unsecured so your home will not be at risk
  4. Poor credit, CCJ’s & Defaults always considered
  5. Fixed rate interest, your payment will not change during the loan

A guarantor loan in a (golden) nutshell

An easily accessible loan for you if you have poor credit, backed by your nominated guarantor.