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How a Guarantor Loan Application Works

A guarantor loan application is slightly different to your average application for a loan or credit card, because it is not just you and the lender but also an extra person (your guarantor) who needs to be involved in the process.

The person you select to be your guarantor, their availability to speak to the lender and have a good credit rating will be key in getting your loan approved and borrowing the amount you require, with a maximum of £15,000 available.

Most lenders require you to complete an online application by desktop, mobile or tablet and there are usually some follow up questions by phone. Most guarantor lenders we feature offer a 5-minute application form. Although the underwriting process varies from lender-to-lender, below we provide an overview of the general criteria and how it works.

  1. Enter Your Details
  2. Enter Your Guarantor’s Details
  3. Verify Your Application
  4. Confirm Details Over The Phone
  5. Checks & Extra Proof
  6. Funds Sent To Your Guarantor 

Step 1 – Enter Your Details

You can start your application by first choosing the best lender to suit your requirements. This is available through our helpful comparison table to give you an idea of loan length (ranging from 1 to 7 years), amount you can borrow (£500 to £15,000) and the rates you pay (ranging from 39.9% to 59.9%). Once you have selected the lender of your choice, your click will lead you to the lender’s application page where you can apply.

You will be required to enter the following details:

  • Name, age, address
  • Employment, income, expenses
  • Debit card details

The information is required to identify you as a person and also see if you meet the initial criteria which involves being over 18 years of age, in employment and able to afford repayments. By providing your card details does not mean that any money is going to be taken from your account. It is necessary to run a credit score on your name and also so they know where to send the funds if successful.

Some lenders may ask for the purpose of your loan such as an emergency purpose or to pay for an expense such as a new car, wedding or business. The loan provider wants to ensure that you are using their finance for a genuine purpose and not a frivolous spending opportunity.

Step 2 – Enter Your Guarantor’s Details

At this point, you are asked to enter your guarantor’s information, although some lenders will ask for this information later. You simply need to include information such as name, age, date of birth, address and employment status.

It certainly speeds up the process if you have already found your guarantor and they are ready to help you with the application. This is more efficient option than applying for a loan and then spending days to find a guarantor and have them available to complete the information.

how-application-works

For this reason, it is ideal to have a guarantor who you regularly speak to and know very well. Of course, you will already be discussing your financial situation with them, but provided that they are there to help you and answer any questions, you can get the application moving quickly.

To also save you some time, it will maximise your chances of being funded if you have a guarantor who has very good credit and is ideally a homeowner. This is based on the idea that if someone with a good credit history of repaying other loans and credit is willing to sponsor you and back you up for a loan, well the lender feels confident that they can trust you too.

Being a homeowner means that the individual has already gone through the rigorous credit and affordability checks involved with getting a mortgage, so a loan application should be straightforward. Plus, by having a property means that they always going to be able to raise funds if need be to repay the loan – either by renting out their property or getting a second mortgage. Also, they are always going to be easier to contact if they have a fixed address and a mortgage to pay on it.

If you cannot find a homeowner to be your guarantor, there are some lenders we work with like UK Credit, Buddy Loans and Amigo that offer tenant guarantor loans. This means that your guarantor can be living at home or in rented accommodation and you can still be accepted if they have a strong credit rating. Due to increased risk the cost of the loan can be slightly higher and the amount you can borrow may be slightly less.

Step 3 – Verify Your Application

The guarantor lenders we work with will always ask you and your guarantor to verify your loan application. They will typically send you an overview of the terms of your loan via a SECCI and loan agreement. To confirm that you have read the terms and are happy to proceed, you will be required to sign this. Most lenders allow you to electronically sign the agreement or use an Esign – rather than slowing things down by asking you to print something off, scan it back or send it in the post which could take a few days.

How-to-eSign

It works by sending you a PIN code is sent to your mobile phone and you are sent an email with a unique link. When clicking on the link, you will see your loan agreement and simply need to enter your unique PIN code to verify it is you. This clever method is commonly used for online financial products as a way to confirm the user’s mobile phone number and email address. Plus, it confirms your desire to proceed with the loan application and if you want to continue.

Step 4 – Confirm Your Details Over The Phone

Some of the guarantor loan lenders we feature insist on having a quick phone conversation with the borrower and the guarantor prior to funding the loan. This is because there is large responsibility on all parties involved. The beneficiary is required to repay a loan over a long period of time and the guarantor is committed to repaying it if the main borrower does not. A phone call confirms that everyone is aware of their responsibilities and also the loan terms including monthly repayments, collections and rates charged are all crystal clear.

Step 5 – Checks 

The lenders will always be running checks in the background but at this point, they are likely to be more details. Whilst each lender has their own method of doing things, a common check is the credit check. Each company will work with one or maybe all of the three main credit reference agencies in the UK: Experian, Call Credit and Equifax.

credit-checks

It works by the lender paying one of the credit reference bureaus a small fee to access the information on your credit file. This will give them an idea of the following:

  • How many loans you have open at the moment
  • Your debt to loan ratio
  • Your history of repayment for other financial products
  • Your name and address
  • Any linked accounts to spouses or family members

Realistically, the lender does not expect the main borrower’s credit score to be excellent, hence they need a guarantor loan. Otherwise, they would use alternative methods of finance such as personal loans or credit cards. However, the lender may be wary of an individual that has several loans open at the same time because it could make their loan harder to afford. Similarly, any history of CCJs, IVA’s or bankruptcy could make the application ineligible to some lenders, although we do have lenders that accept this.

What is the more important is the credit profile of the guarantor because they are going to be the last person responsible to repaying the loan. If this individual has a long history of repaying credit on time and they are currently over 25 and in employment, it puts the application in a good position to be funded.

Another key metric is affordability which is a matter of taking existing expenses and monthly income to get a feel of how much the customer can afford to borrow without falling into debt. Again, each lender has their own way of doing things which is interesting because one lender may be able to offer more than another. One of our lenders, TFS Loans, is able to extend loans up to £15,000.

To carry out the affordability checks, some lenders will ask for income and expenses information in the application form but some lenders may request documentation proof of pay-slips and bank statements from the borrower and guarantor at this point to help make their final decision.

Step 6 – Funds Sent To Your Guarantor

If your application is successful, most of our lenders can transfer funds within 24 to 48 hours of approval. The majority of lenders tend to send the full lump sum to the guarantor first. This is a security measure to make sure that they have not given the loan to a person who is unfit. For the very least, they know that they are sending the funds to someone with a good credit score who will be in a good position to repay it if need be.

For the guarantor, they are given a standard 14 day ‘cooling off period’ which give them the flexibility to make a decision about passing the loan onto the borrower or sending it back to the lender within the time period without any fees added. It also means that the guarantor can give the funds to the borrower in instalments, smaller amounts or the full lump sum if they wish.

How Our Website Works

We are a licensed broker in the UK allowing customers to compare guarantor loans effectively. We have partnered with some of the leading providers in the country and offer a simple way to make a comparison by looking at the loan amount, loan duration and fees charged.

Our site is completely free to use and we will not take your details or charge you any fees at all. Instead, you choose the lender that suits your requirements and you will be taken to their website where you can apply. Don’t forget that the application and process will vary between lenders. You can apply 24 hours a day, 7 days a week and most companies are able to issue funds within 48 hours of being successfully approved.

If you have any questions about our website and how it works, feel free to email us at info@guarantorloans.com 

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