What do I need to know about tenant guarantor loans, so I can get one?

Stick man pointing to the right

Today there are many types of loans available for people who have guarantors.

Getting this type of loan if you do not own your own home is not new, in this article we arm you with the knowledge you need to maximise your chances of a successful application.

From a tenant perspective we cover the things you need to do to get the best deal.


Helping tenants from the start

Right from the start loans with a guarantor have been available to tenants.

The concept of a loan with a guarantor is not new but the market in the UK still has many lenders that are only a few years old. It really started to grow after the Credit Crunch in 2007 when a huge number of people through no fault of their own found themselves out of work and struggling financially. The result of this was missed loan or mortgage payments and defaults which then showed up on their credit files.

In an economic environment where lenders were getting more cautious about who they were lending to it became harder for people to borrow money, and with a poor credit history it became both difficult and expensive.

It was during this time that there was a huge growth in extremely high cost payday type loans, and in response to this new lenders started offering the much more affordable guarantor type of loan, and have accommodated tenants almost from the very start.


Concept

The concept of this type of loan is simple:

Find someone with a regular income and clean credit history to be your guarantor and back your loan application, therefore meaning that your ‘bad credit history’ no longer matters.

The key for this type of loan with the lenders is affordability – can you and your loan backer comfortably afford the repayments?

Affordability

If you are a tenant, and both you and your loan backer can afford the loan repayments then you do not have a problem.

People typically only stop making repayments if they can no longer afford them, maybe due to an unexpected expense or maybe they borrowed too much? When applying for a loan the key criteria is that you can genuinely afford it.

For this type of loan, it is critically important that you and your loan backer both have a regular income and can clearly show you can afford the repayments. The reason your backer needs to show this is that they are legally liable to make the payments if you ever stopped.

It is one thing defaulting on a loan and having to deal with the consequences of non-repayment yourself, but if your default causes consequences to another person, then this should promote serious planning to make sure this never happens.

So, as a tenant applicant, you need to show that you and your backer can comfortably afford the repayments.

To help you do this we suggest

  1. You estimate your monthly repayments using our Loan Calculator
  2. Both of you fill out the Citizens Advice Bureau’s Budget Planner including the new loan costs

Guarantor also a tenant

If your loan backer also is a non-homeowner this is not a problem; there are lenders on our panel who have loans available to both borrowers, and guarantors who are non-homeowners.

The affordability criteria still applies and is very important.

Missed Payments & CCJs OK

If you have a County Court Judgement, defaults, or missed payments then our lenders will still consider your application.

They will not, however, accept any form of formal insolvency such as and IVA (individual Voluntary Arrangement), Trust Deed (Scotland only) or personal Bankruptcy.

Your loan backer, however, does need to have a clean credit file and advice to help them find out if their file is clean we expand on below.

Credit File

Your loan backer needs to find out before you apply if they do in fact have a clean credit history.

You credit file is your own personal financial report card that lists all financial agreement that you have taken out, along with payments made (or not), plus other related information. The information they hold on record goes back six years. So if there were missed payments or CCJs seven years ago, this would not show up.

There are three credit reference agencies in the UK which list this information about you, and they are Call Credit, Experian and Equifax.

The information though varies slightly between each; some will show some lenders and some other debts, so downloading the free report from one of these agencies will not necessarily show you all the information that you need to see your credit history.

Your guarantor therefore needs to download a multi-agency credit report which will list all the information from Equifax, Experian and Call Credit to get the full picture.

To do this go to Check My File which is the only UK company which lists all this information.

Criteria

While lender criteria does vary, there is typical criteria that you and your loan backer will need to meet:

  • UK residents and bank account holders
  • Regular income (which will need to be proved)
  • Typically Over 18 and below 75 (though this can vary slightly from lender to lender)

Next Steps

The next steps for you, if you are interested in getting credit are:

1. Compare the loans available on our table

This table gives a great deal of information about all the different options available

2. Apply

When you fill out the application from on guarnatorloansuk.net, we will look at your input data and send your details to the lender who meets your requirements.

At this stage

a. You are under no obligation to take out a loan
b. You do not incur any charges or fees from either us or the lender
c. Neither you or nor loan backer will be credit checked

Loan Calculator

Use the loan calculator below to estimate monthly loan repayments.

Approximate figures

  • Monthly repayments from to . Total repayable from to . Representative APR's from to

Click to see all our lenders Representative APR's

This tool is for GUIDANCE ONLY. It is designed to help you estimate loan repayments. It uses the representative APR of each product. Lenders have a duty to conduct affordability checks when you apply for a loan, see Responsible Lending.