Debt consolidation Guarantor loans

Keeping on top of debt can be complicated. It is always recommended to carefully consider all financial options before deciding whether a Guarantor loan is the best option for you to consolidate your debt. Each person’s circumstances are different, and as a responsible lender, we assess each application based on the individual’s financial situation and the affordability of the new lending.

What is a debt consolidation loan?

When a person has a number of different debts with different credit providers, they may decide to take out one loan and use this to settle, some or all of, their other debts. This means those debts are combined into one single monthly repayment, possibly at a lower rate of interest, the aim being to make the total borrowing more manageable.

An All Homeowner Guarantor Loan is an unsecured loan and is a way of borrowing with the help from a Guarantor who, like the Borrower, owns their own home. The Guarantor agrees to cover loan repayments if the Borrower does not.

Some considerations for debt consolidation, when compared to existing debts:

  • Affordability of the new overall and monthly repayments
  • The new interest rate
  • The term of the new loan
  • Any fees charged for settling other debts

A debt consolidation loan could be an option for those:

  • Making multiple debt repayments every month. This may be credit cards, store cards, finance deals and/or loans
  • Paying high levels of interest across multiple payments
  • Looking to manage their finances better

Choosing a debt consolidation loan

There are some important factors to consider when choosing a Guarantor loan to consolidate debt.

How much do you need to borrow?

This depends, you may want to borrow enough to consolidate all of your other outstanding debts, however, you should consider the interest rates on your outstanding debts and how long those debts have left before they will be repaid, before deciding which debts it may be beneficial for you to consolidate. If you are struggling financially you should consider whether a consolidation loan is the best solution, or whether a debt management solution would be a better option for you. You may wish to seek independent advice and can find some useful information here.

How quickly can you pay off the loan?

It can be tempting to choose a longer repayment term in order to reduce the amount you pay each month, however, this may result in you paying more interest, and increase the amount that you repay in total. A shorter repayment term may enable you to pay off debt quicker, though this often means the monthly repayments will be higher. It is important to consider how much you can reasonably afford each month and how much you are paying overall before agreeing to a term.

Our Guarantor loan calculator can help provide an estimate of monthly repayments and the total amount payable over different loan terms.

There are many things to consider and should think carefully about the various options open to you

How to apply for a debt consolidation loan

1. Find a Guarantor

To act as Guarantor there are some initial criteria the individual must meet. Most importantly, the Guarantor must be a homeowner with a good credit rating of their own. During the application process, UK Credit will need to discuss the Borrower’s financial situation with their Guarantor including any existing credit commitments, payment history and disposable income, so full transparency between the Borrower and their Guarantor is important. A Guarantor must agree to cover repayments if the Borrower doesn’t make them, and we will only approve an application if we believe both the Borrower and their Guarantor can individually afford the monthly repayments.

2. Apply online

When applying online, the Borrower and their Guarantor will need to answer some questions to make sure they meet our lending criteria. We will carry out some initial eligibility checks before completing an affordability assessment with the Borrower and their Guarantor over the phone. This is done to check that the loan repayments are affordable and that the Guarantor is aware of their responsibilities.

3. Receive your funds

Once approved, we’ll pay the loan funds into the Guarantor’s bank account. They will then be responsible for transferring the funds to the Borrower.