If you are looking to obtain a guarantor loan, it is likely that you will have a number of questions. The following guarantor loans FAQs will provide you with what you need to know.
What is a guarantor loan and how does the guarantor loan work?
A guarantor loan is a loan where a guarantor vouches for the applicant. This means that people with bad credit who would normally be denied the chance to obtain a loan have a greater chance of being accepted. The role of the guarantor is to provide the lending company with a degree of confidence that even if the borrower fails to make payments; the payments will still be made. This is where the role of the guarantor is crucial because if the borrower fails to pay on time or in full, the lending company will seek to claim the money from the guarantor.
There is no need for the guarantor to provide any collateral for the loan which means that a guarantor loan is an unsecured loan. The amount of money on offer for a guarantor loan varies by each company but you will usually find that the amount of money on offer varies between £1,000 and £12,000. However, it is important to only borrow the amount of money that you need, not which you can obtain.
What is the eligibility criteria for being a guarantor?
First of all, the guarantor cannot be someone that is financially dependent on the borrower or someone who shares a bank account, credit card or even a mortgage. However, you will often find that the guarantor is a family member or a very close friend, and it makes sense for the guarantor to be someone that knows the borrower well. Being a guarantor is a huge responsibility and it isn’t something to take lightly.
While there is no real barrier on who can act as a guarantor, due to the responsibilities involved and associated with being a guarantor, it is expected that a guarantor would have a close relationship with the borrower.
The guarantor will also usually have to:
- Be a UK citizen
- Have a good credit score
- Have a current bank account in the UK
- Be over 18 years of age
Other criteria which may be applied, depending on the firm includes, owning a home and being below 70 years of age.
What work does a guarantor need to do?
With respect to obtaining the loan, a guarantor will not actually need to do that much work. However, they should be prepared for a phone call or some form of contact from the guarantor loan company. It is understandable that the loan company will want to verify information and ensure that the guarantor is happy with their responsibilities. They may also have to sign some papers and provide bank statements but there isn’t too much for a guarantor to do in the application process.
How quickly can I gain access to the cash?
Once the lending firm has received all of the documentation, the money is processed and placed into the borrowers bank account. While the process may take up to 7 days, you will find that many guarantor loan companies promise to provide the funds within a 24 hour period. The longest part of the process comes with completing the application and then for the loan company to verify the details. Once this has been completed, it will not take too long for the money to be transferred to the borrower.
Do I need to pay money to apply for a guarantor loan?
While there is a need to verify this with the individual guarantor loan company, the vast majority of guarantor loan firms will not charge a fee for applying or obtaining a loan from them.
Are there early payment fees when paying off a guarantor loan?
Again, this is something that needs to be verified with the individual guarantor loan companies but the vast majority of guarantor loan firms will not charge a fee for paying off a loan early. This means that people can save money by paying off loans early if they have the available means to do so.
It is always wise to read through the terms and conditions of an individual guarantor loan company but this information will provide you with a strong starting point when it comes to knowing what a guarantor loan entails.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.