03 Jun 2019

If you’re keen to apply for guarantor loans then it’s essential to find a guarantor to support your application. There are lots of benefits to having a guarantor on your side, including the peace of mind of knowing that you have back up if something goes wrong. Lenders are usually more willing to approve applications with guarantors, especially if you have a bad credit score. A guarantor could potentially be the difference between whether you’re able to borrow or not – so, how do you find one?

 

What do you need to find a guarantor?

 

Lenders who offer guarantor loans will require that you have someone who supports your application. That person is a guarantor, someone who will step in and take over repayments if you’re not able to make them for whatever reason. A borrower with a guarantor is very attractive to a lender because they represent a back up should something happen to the finances of the original borrower. Guarantor loans can be an ideal solution for people who may have:

 

  • No credit score
  • A bad credit score
  • A lot of other debt
  • Need to borrow a larger loan
  • A low income
  • Want to borrow over a longer period of time

 

How to find a guarantor

 

Lenders tend to have different criteria when it comes to a guarantor but, essentially, it should be someone who will be attractive to a lender. It’s also important that you find a guarantor who knows you and trusts you to make the repayments. For that reason many people find a guarantor among friends or family members. You may want to create a short list of potential guarantors and then sit down with each one and work out whether they are in a position to help you. This usually means being completely open about your financial situation, what you want the money for and how you’re going to make the repayments. A guarantor may have questions that seem personal about your income and outgoings – that’s why it’s essential to choose someone that you trust.

 

What are the obligations on a guarantor?

 

Essentially, if you’re not able to make the repayments on the loan that you’ve been approved for the responsibility will fall on the guarantor. That could mean making one or two repayments when you’re struggling or taking on the entire loan until it has been completely paid off. It can be a big financial commitment so it’s important to make sure the person you choose fully understands what they are signing up for (many guarantors take independent legal advice). In particular, you should check that the guarantor can afford to pay off your loan for you if they have to, and still have enough to live off.

 

What’s the process involved?

 

  1. When you make your application this will be submitted with the guarantor’s details
  2. Both you and the guarantor will be credit checked
  3. The guarantor may be asked to provide certain documents, such as proof of identity
  4. If your application is approved the guarantor will co sign the credit agreement with you
  5. The guarantor will be given a copy of the credit agreement and will receive any notices that are sent to you while you are the borrower

 

Who can be a guarantor?

 

  • Anyone over the age of 18 can be a guarantor in theory but the exact criteria will depend on the lender’s requirements. Some lenders have a higher age limit, for example 21.
  • Guarantors should have a good credit history. For example they haven’t had trouble paying their bills in the past, have no CCJs against them and haven’t defaulted on any of their own credit agreements.
  • Some lenders will require that a guarantor is a homeowner. This is not always the case but, depending on your application and what you want to borrow, this could be a requirement.
  • The lender will need to be based in the UK. Most lenders will not accept a guarantor outside the UK. This is because it would be difficult to enforce the guarantee against the guarantor if they were outside the jurisdiction of the English courts.

 

What documents does a guarantor need?

 

Guarantors usually need to provide proof of ID, such as a passport. There may also be requirements to provide proof of address, property ownership and/or proof of income.

What is a guarantor declaration?

 

Anyone who is taking on the role of the guarantor will need to declare that they understand what’s involved and are happy to accept the obligation.

 

What happens if a guarantor cannot pay?

 

Lenders carry out fairly comprehensive affordability checks to guard against a situation where a guarantor cannot pay. However, if that happens then the lender may decide to take legal action. If the guarantor is a homeowner this may result in the guarantor being forced to sell their property to repay the debt.

 

A guarantor can make borrowing easier and may be essential if you have a bad credit score. Finding a guarantor is a simple process when you know what to look for.