YOUR GUARANTOR WILL HAVE TO PAY BACK YOUR LOAN IF YOU CANNOT MAKE YOUR REPAYMENTS, SO MAKE SURE THEY UNDERSTAND THEIR RESPONSIBILITY BEFORE YOU APPLY.
A close friend or family member, someone who knows you and trusts you will keep up with your repayments. If for any reason you do not repay the loan, it will become the Guarantor’s responsibility, so they are taking on a significant financial responsibility if you don’t make the repayments and could be liable for the full outstanding debt. They need to understand this before they commit to act as your Guarantor.
An ideal candidate for a Guarantor could be:
Not in all instances. If a Guarantor has a strong credit rating and credit score, they do not always need to own a property. Some higher loan amounts may however require the Guarantor to be a homeowner. The loan is not secured against their property, but if you fail to pay and the Guarantor doesn’t pay, we may need to take legal action again one or both of you, and this may involve us asking the court to make a charging order against any property they own.
Loans are paid out into the guarantor’s bank account. This is to prevent fraud and give you the option of changing your mind before you transfer the money to the borrower.
First we will contact you to have you help us connect with the borrower, if we get them back on track with the payments, that’s great. Otherwise the guarantor must bring the arrears up to date.
We will look at your credit file to make sure that you are financially stable and haven’t had trouble paying back your bills in the past. This will not affect your credit score held with the credit reference agencies. Anyone searching your credit file wouldn’t be able to see if you’re a guarantor on the loan, or even that you’re linked to the borrower.
The one time you could find your credit file and score affected is if both you and the borrower refuse to pay and we are forced to take court action, where the court judges that you must pay and you still refuse. In these circumstances, after 28 days the court will record the judgment on your file.
We write back details of the loan to the borrower’s credit file with major credit reference agencies. If paid on time this will help them to build their credit score and eventually they’ll be able to borrow from other lenders.