As we often receive questions about guarantor loans, we have compiled a list of frequently asked questions for your convenience. If you still have a query after reading through these, please do not hesitate to contact our friendly staff who are more than willing to help you.
Can you offer suggestions for who make the best guarantors and why do I need one?
First things first. The main thing about your guarantor is that they should be 18 to 65 years old, hold a steady job and be able to prove their income. Normally, a family member or best friend is the best person to approach to be your loan guarantor. Take note, your spouse or partner generally is not allowed to be a guarantor.
The reason a financial institution will ask you to find a guarantor is basically because you have a bad credit rating and have missed various types of credit payments before that put you into that position. The guarantor then acts a security buffer for the company, giving them piece of mind as legally, the guarantor will have to pay your loan instalments should you miss one.
What documents do I need to apply for a loan?
There are a number of documents that both you and your guarantor will need to supply to the loan company when you apply for the loan. These include identification documents, proof of residence, proof of income as well as three months’ worth of bank statements to confirm your income and expenses.
If I get a loan, when can I expect the money in my account?
Most loan companies will take between 24 to 48 hours to pay the amount into your account. It often depends on banks clearing the amount of money quickly enough. Some take a day to do this, while others will do it immediately. Take note that the money will not be paid into the account of the loanee but instead into the account of the guarantor. Discussion as to where the money is paid from that point on is of no consequence to the lending company but a matter between the loanee and their guarantor.
Ok, so the money has been paid into the guarantor’s account. When is my first payment due?
In most cases, the first payment will be due at the end of the following month. Say your guarantor received the money on the 20th August then you will be due to pay your first instalment on 30th September. Every month after that a payment will be made on the 30th of the month until the loan is finished and the amount loaned, plus interest, paid off.
I have come into some extra money. Can I pay that into the loan?
By all means, do! As a financial advisor, we recommend that not only do you pay an extra money into your tenant guarantor loan but that you also try to pay back slightly more each month. Even if this is only 10 extra pounds a month, it can save you a great deal of interest over the terms of your loan.
Will the monthly payments ever change?
No, they shouldn’t! All tenant guarantor loans should be set at a fixed interest rate. Make sure you read all the fine print and terms and conditions of the loan contract to see that this is indeed true.
This month has some unavoidable extra expenses. I don’t think I can pay my loan instalment!
Firstly, if you are sure that you will not be able to pay your loan instalment, don’t just leave things hanging. Make sure you contact your loan provider and inform them as well as your guarantor. Your loan provider, depending on how they operate, may be able to make an exception for one month. They usually do this by tagging on that payment to the end of the loan. Whatever you do, do not just ignore the fact that you cannot pay. It is your duty to inform everyone.
Can a guarantor opt of the agreement?
In most cases, even if the contract has been signed, a guarantor can opt out of the loan as long as the money has not yet been paid into their account. This also cannot just be done verbally and the loan company must be informed in writing. If the money is in the guarantor’s account, then nothing can be done about opting out of the loan.
Does the credit rating of the guarantor make a difference?
Indeed it does! The guarantor must have a positive credit rating and record to be able to sign surety on the loan.