If you have a good credit score and a stable job, then it is not uncommon to have a friend or relative approach you to act as a loan guarantor. Conversely, at times you may worry about a dear one wondering how to guarantee approval for a loan in the UK, to bail them out of a financial mess. Either way, you need to be aware of certain things before acting as a guarantor for someone else. As guaranteeing a loan puts you under the serious obligation to repay the debt if the borrower fails, it is always good to be sure of certain facts beforehand.
Unless you have guaranteed a loan earlier, chances are that you do not know much about how to guarantee approval for a loan in the UK, leave alone knowing your duties after guaranteeing. As a loan guarantor, you are not only under the obligation to repay the loan in case of default, but also risk being sued if you are incapable of doing that. So, before you make that decision, there are a few things you need to know. So, we created this complete guide on how to guarantee approval for a loan in the UK, safely, without risking your own credibility.
FAQs | How to guarantee approval for a loan in the UK
- Should I guarantee a loan approval?
- Who can guarantee a loan approval in the UK?
- How to guarantee approval for a loan in the UK?
- Will I be credit checked as a Guarantor?
- Who is a loan guarantor?
- Will being a guarantor affect my credit score?
- What are the liabilities of a guarantor?
- What happens when the borrower stops making repayments?
- Is it mandatory to have a guarantor to borrow a loan?
- How to ensure that my loan is approved in the UK?
- Will being a guarantor affect my eligibility for a loan?
- Can I stop being a guarantor for a loan?
- Can I guarantee approval for a loan in the UK with bad credit?
- How can I know if the borrower intends to repay the loan?
You are most likely thinking about guaranteeing a loan approval because someone has approached you to back them as a loan guarantor. This means that the person who has approached you needs you to vouch him or her on the loan application. Usually, when a person’s own credibility isn’t up to the mark, then the lender may ask that person to furnish one or more guarantor. So, if someone needs a guarantor then it is quite possible that he or she has a low credit score.
Now that does not mean that the person approaching you is shady and not worth your trust so that’s not what you must perceive. Many people end up with low credit scores due to the lack of financial literacy and not entirely due to their own fault. Also, at times people are hit by circumstances that they have no control over. Nevertheless, you must seek absolute clarity before you sign or e-sign the loan agreement as a guarantor.
So, make it a point to seek information such as the loan amount, loan tenure, APR, monthly payments, borrower’s sources of income, existing debts, and other financial obligations. This would give you a clear picture of whether or not the borrower is capable of repaying the loan. Also, you need to check your own income to confirm that you can pay on behalf of the person you are guaranteeing, if that person defaults. The whole purpose of having a guarantor is to ensure that the amount is recovered from the guarantor, if the principal borrower defaults.
In the UK, only UK residents aged between 18 and 75 can guarantee a loan approval. Also, the guarantor must hold a UK bank account and must be capable of entering into a contract. In addition to that, the person willing to act as a guarantor must have a regular income, which could be anything such as salary, rent, or even pension.
Contrary to the popular belief, the guarantor is not required to own a home. The only rule is that the person guaranteeing a loan must be capable of comfortably repaying it if the principal borrower defaults. So, in order to guarantee approval for a loan in the UK, you need to have the affordability to repay the loan, if the principal borrower fails. You must prove this to the lender by disclosing your income sources and also your expenses. The lender would evaluate whether you can comfortably repay the loan on behalf of the person you are guaranteeing, if that person fails to repay.
If you have a friend or relative who is going through a financial crisis then the best way to genuinely help them out is by acting as a guarantor. By doing that you can help that person get back on his feet and start afresh. As most people struggling with their finances have low credit scores, they usually need a guarantor to get a loan approved. That’s because while dealing with financial issues, people tend to miss repayments. So, they might find it difficult to borrow a loan from a bank or a lender without a guarantor. This is when most people approach their friends and relatives who have a good credit score and a steady income to guarantee their loan.
If it is someone you do not know too well, then avoid guaranteeing their loan because you could end up in a financial issue. So, only back those persons whom you know well and trust completely. Once approached to act as a guarantor, do ask that person for his financial details such as current income and other debts. Also, find out how much money that person intends to borrow, the APRs, and the term of the loan. After taking these things into account you should be able to make the right decision. To stand as a guarantor, you need to physically sign or e-sign the loan agreement in the capacity of a guarantor.
Yes, when you guarantee a loan on behalf of someone else, then you are submitting yourself to be held liable for the payments in case the principal borrower defaults. So, the lender performs a credit check on you in order to ensure that you are capable of repaying the loan. So, you are credit checked after you sign the document and formally submit yourself as a guarantor. In fact, it is your credit history that plays a major role in the approval of the loan. Lenders always prefer guarantors with a clean credit history. So, if you have not made any financial mistakes in the past six years, then that should be good enough. At Money Pig, we have a structured loan approval process that makes credit checks easier and convenient for both the borrower and the guarantor as well. Also, we offer several other types of unsecured loans that you can apply for.
A loan guarantor is a person who agrees to bear the liability on behalf of the principal borrower, in case of a default. This provides a reassurance to the lender that he will receive the repayment from either the principal borrower or the loan guarantor. Usually, lenders require those with a bad credit history to furnish guarantors. Also, the lender may want you to furnish a guarantor if you wish to borrow a larger amount. The lender may ask for it if the lender considers the loan amount to be more than what you can comfortably repay. If you are struggling with your finances and cannot find a lender willing to advance loans without a guarantor, then consider applying to Money Pig’s no guarantor loans. We have several licensed lenders within our network who offer loans without the need to furnish guarantors.
Yes, being a guarantor could affect your credit score in certain circumstances. As a guarantor, your credit score is critical for the loan approval process. As a matter of fact, the loan would be approved or rejected based on two factors — the guarantor’s credibility and the borrower’s repayment capability. So, the guarantor’s credit history does matter because the lender expects you to repay if the borrower does not. So the lender confirms your ability to repay the loan by running a credit check on you, soon after you sign the documents as a guarantor. Nevertheless, lenders are very careful during the initial stage and only perform soft credit checks on guarantors. Since soft credit checks do not show up on your credit file, there isn't much that you need to worry about at this stage.
The check carried on until now was solely to check your eligibility to guarantee the loan. However, things can go bad if the principal borrower fails to repay the loan. This is when your liability as a guarantor arises and therefore you must stay informed about the repayments of the loan that you guarantee. If you fail to do so, then you may miss repayments that you are obligated to make and that would have a direct adverse impact on your credit file and would hurt your future prospects of borrowing a loan. Also, you must restrict the person you are guaranteeing from using your name as a guarantor on multiple loan applications as that could have an adverse impact on your credit score. In fact, you must educate the principal buyer that making multiple loan applications isn't good for his credit score either and may further lower it. That's because multiple loan applications mean multiple hard credit searches performed on the borrower.
Let the borrower know that if the purpose of making multiple loan applications was to get the best deal then there’s a better way of doing that. Applying for a guarantor loan on Money Pig’s website would connect the applicant to several lenders at once. That means, the applicant can get multiple quotes with just one loan application. So, advice the borrower to submit an online loan application on our website and we will run a soft credit search on the borrower and forward your loan application to multiple lenders. Only the lender you choose to borrow from would perform a hard credit search on you. So, these are some things that you need to take into account while guaranteeing a loan.
As a loan guarantor, you are expected to bear the same liability as the principal borrower does, from the moment the principal borrower fails to repay the loan amount. So, as a loan guarantor, you would be liable for the remainder of the loan amount, which is not paid by the principal borrower. This includes both the sum borrowed and the borrowing costs, which the loan guarantor would have to repay. So, before guaranteeing someone, it is very important to be sure of that person’s finances and motive. Also, you must back someone as a guarantor only when you can afford to repay the loan that you are guaranteeing.
It is very much possible that the person you back as a guarantor makes prompt repayments for a while but then fails to do so. In that case, the lender is likely to get in touch with you to keep you informed about it. So, make it a point to keep the lender updated if your contact details change. You must at all times remain informed about missed repayments because not doing so and not repaying the loan in case of default could lower your credit score. If that’s making you think twice about guaranteeing a loan, then you could advice your friend or relative to submit an application on Money Pig’s website. Money Pig is a financial intermediary that’s tied up with several lenders. So, we have no trouble connecting you with lenders willing to offer no guarantor loans.
No, it is not mandatory to have a guarantor to borrow a loan and you can find several loans on our website, which do not require a guarantor. Money Pig has a network of lenders that offer numerous secured and unsecured loans that you can borrow. So, if you wish to borrow a no guarantor loan, then Money Pig would be glad to assist you through the process.
In the UK, you need to fulfill certain mandatory criteria in order to qualify for a loan. Usually, it is required that you are a UK citizen and have completed 18 years of age. Also, you must have a steady income to repay the loan. If you wish to borrow a large sum for a longer period then you might be required to provide security in the form of collateral. Also, credit checks are mandatory in the UK and so the lender would perform that while reviewing your loan application. If the loan application is rejected, then it could have an adverse effect on your credit score. Now, this is something that you need to worry about unless you are applying to Money Pig. At Money Pig, we follow applicant-friendly practices such as soft credit checks, no loan application fee, and no loan processing fee.
Sometimes, the lender may ask you to furnish a guarantor to back you in the loan agreement. So, before approaching the lender check if you can comply with all these requirements. Also, you need to know the loan amount you are eligible to apply for. Always find that out and apply for an amount less than that. You can get a clue of your loan eligibility from the loan eligibility calculator available on the website of a lender. However, remember that it is a tool that is designed to give you an estimate, which may or may not be accurate, so use it only to get an estimate. The figures shown by the loan eligibility calculator are not conclusive as there are several other factors that are to be taken into account.
There is no definite answer to this question because while some lenders consider the loans that you may have guaranteed, there are others who don’t. Usually, it is the mainstream banks and financial institutions that take such factors into account. So, if you have guaranteed someone else’s loan then it is quite possible that you may be denied a loan on that basis. However, Money Pig can help you get in touch with lenders who would be willing to oversee the fact that you guaranteed someone else. So, regardless of your status as a guarantor, Money Pig’s lenders can help you borrow loans at the most competitive interest rates.
For many reasons, you may want to discontinue backing up your friend or relative as a guarantor for their loan. So, if you are wondering whether you can stop being a guarantor for a loan then it may not be too late. You can refuse to guarantee the loan any time prior to the funds being released in favor of the borrower. Also, you might be able to exit the agreement if both you and the borrower agree to that within fourteen days of signing the document as a guarantor.
The Financial Conduct Authority (FCA), the government agency responsible for the regulation of lending activities in the UK lets guarantors cancel the contract within a period of fourteen days. The days are calculated from the day on which you sign the loan agreement as a guarantor. However, you may be held liable for interest or fees for the period commencing from the date you signed the agreement until you withdrew from being a guarantor. So, when someone approaches you to back them as a guarantor, it is always better to ask the borrower for some time. Use that period to do your research and to make the right decision.
If you have a bad credit score and someone approaches you to guarantee their loan, then it is always better to excuse yourself. In the UK, lenders count on the guarantor’s creditworthiness and therefore the loan could be rejected due to your bad credit score. Lenders prefer guarantors with good credit scores or at least average credit scores.
It all depends on the comfort level that you share with the borrower and how well you know each other. Even if you are guaranteeing a close relative, you could still get duped and may end up repaying the amount you guaranteed. However, you can avoid that by asking the borrower some serious questions. So, before guaranteeing a loan make it a point to ask the borrower the purpose for which he intends to borrow the loan. Ask how the borrower plans to spend the money and how he intends to repay it within the stipulated period. You may even have to check the borrower’s financial statements to confirm if the borrower can indeed repay the loan. Last but not the least, ask the guarantor about his credit score and for a detailed explanation as to why he is being asked to furnish a guarantor. Later, make it a point to confirm the same with the lender just to be sure that the borrower is being truthful.
Guaranteeing a loan in the UK can be a complex process. So, if someone approaches you to guarantee approval for a loan in the UK, then you must make a well-informed decision. Alternatively, you can redirect the borrower to Money Pig for the best deals on no guarantor loans. For the best deals, Call Now.