When searching for finance, your credit score can hold you back. A recent survey by YouGov on behalf of Pepper Money has revealed that nearly four in 10 British adults admit to having missed more than one credit payment against a debt.
Low-cost lenders and high street banks often require applicants to have an exceptional credit score to be accepted. So if you’re looking to purchase a new car, access finance for home improvements or consolidate other debt, adverse credit history can impact your ability to do so.
This is why subprime and bad credit lenders exist. They allow those with a less-than-perfect credit history to access finance and rebuild their credit score.
Guarantor loans are a type of unsecured loan that can help those with a low credit score access the finance they need.
Guarantor loan providers require their applicants to provide a guarantor. The guarantor supports the application and promises to make any repayments that the borrower misses.
The borrower and guarantor must have a mutual trust and a good understanding of each other’s financial situation. Many applicants will ask a family member or close friend to act as a guarantor.
Are you guaranteed to get a loan with a guarantor?
No, applicants are not guaranteed to get a loan, even if they provide an eligible guarantor. Lenders will typically carry out several checks on both the applicant and the guarantor to make sure they are eligible for the loan.
Most UK-based lenders will require you to have a permanent UK address and be over 18.
Do Guarantor Loan Providers Complete Credit Checks?
Yes, most guarantor loan providers will complete some form of credit check on both the applicant and guarantor. While an applicant can have some adverse credit on their file, many lenders will not accept those in an Individual Voluntary Arrangement (IVA) or debt management plan.
The guarantor must have a good credit score to be accepted.
If an applicant is deemed eligible, but their chosen guarantor isn’t, many guarantor loan providers will offer the applicant the opportunity to provide an alternative guarantor.
Do Guarantor Loan Providers Complete Any Other Checks?
Yes, most guarantor loan providers will complete additional checks on the applicant and guarantor. Any responsible lender will complete an affordability check to ensure both parties can afford the repayments alongside all current monthly expenses.
Providers may also carry out ID checks to confirm your identity, electoral roll searches to confirm your home address, and job checks to confirm your place of work.
During the application process, lenders will also need to speak with both the applicant and guarantor over the phone. This will allow them to make both parties aware of their responsibilities and ensure that they are happy to proceed with the loan agreement.