Loan Guarantor - Debt Relief Order

MachoShirts · 10 January 2018 at 7:03PM

A friend of my co-signed a guarantor loan from Amigo Loans for a work colleague and believed he was able to back out at any point - the loan was for £10,000 over five years with approximately £18,000 repayable over the period. The loan's nine months old, and the colleague is now three payments behind. My friend had to move from full time work to limited hours in a kitchen due to health issues and isn't in the financial position to make repayments on the colleague's behalf.

What my friend was wanting to know is if he's able to apply for a Debt Relief Order or an IVA based on his current financial circumstances - with his income and outgoings he has approximately £20 per month disposable income, and he's only marginally earning more than he would on Universal Credits. He's unsure what his options are with there being two liable parties.

Thanks again for any help!

Pixie5740 · 10 January 2018 at 7:20PM

MachoShirts wrote: »

A friend of my co-signed a guarantor loan from Amigo Loans for a work colleague and believed he was able to back out at any point - the loan was for £10,000 over five years with approximately £18,000 repayable over the period.

If your friend did actually read the information provided to him by Amigo I have no idea* why he thought he could back out at any time. What would be the point of a guarantor loan if the guarantor can just walk away at any point?

*Actually the guarantor can "walk away" under these circumstances:

"You can change your mind about being a guarantor any time before the money is paid out by calling us on 01202 629 200 (Mon-Thurs: 9am-7pm, Fri: 9am-6pm, Sat: 9am-1pm).

If you change your mind before you pay any money to the borrower, you can pay us the full loan amount back, plus any interest accrued, to close the account. Once you have given the money to the borrower, if you wanted to stop being guarantor, you would have to repay the loan in full with any accrued interest, or wait until the loan is settled by the borrower.
The loan's nine months old, and the colleague is now three payments behind. My friend had to move from full time work to limited hours in a kitchen due to health issues and isn't in the financial position to make repayments on the colleague's behalf."

https://www.amigoloans.co.uk/question/how-do-i-stop-being-a-guarantor

MachoShirts wrote: »

What my friend was wanting to know is if he's able to apply for a Debt Relief Order or an IVA based on his current financial circumstances - with his income and outgoings he has approximately £20 per month disposable income, and he's only marginally earning more than he would on Universal Credits. He's unsure what his options are with there being two liable parties.

Thanks again for any help!

That's a good question. What happens to the guarantor's liability for an Amigo loan if the guarantor becomes insolvent**? Amigo's website covers the borrower becoming insolvent but not the guarantor. Your friend might want to check that with Amigo or one of the debt charities (CAP UK, National Debtline or Step Change).

Unless he owns property then an IVA won't be a suitable option for him it would be a DRO or bankruptcy. Again this is something one of the debt charities can advise him about.

Edit:

**I found this online regarding bankruptcy and guarantor loans:

What about if the guarantor goes bankrupt?

"Turning to the other side of the coin, let’s consider what would happen if your guarantor runs into financial trouble during the loan’s term (assuming you’re keeping up with the repayments at this time). If this happens and they become bankrupt, their liability to repay the debt will come to an end and you’ll be expected to keep making payments as usual."

"http://www.bankruptcyclinic.co.uk/blog/bankruptcy-and-guarantor-loans/

redpete · 10 January 2018 at 7:27PM

Your friend signed up to be equally liable with the borrower for the full amount for the life of the loan, that means the lender can come to either of them for the full amount. It would make no sense for a guarantor to be able to "back out at any time" - if this was possible then everyone would do it and the lender would have no protection.

Apologies but I can't help with dro/iva.

MachoShirts · 10 January 2018 at 8:09PM

Yeah, my biggest annoyance is that I didn't find out until after the money had been handed over so I didn't get a chance to tell him how it actually works. My friend's a little too trusting and way too naive for his own good.

I'll get him to contact the charities, so thanks for that. He's due to meet with Citizen's Advice this Friday so they should also be able to give him some advice.

Many thanks!

Ganga · 12 January 2018 at 7:52PM

Where is the colleague with the £10,000 ? why is he not paying it back.

Stu5788 · 14 January 2018 at 1:39AM

I find Amigo one of the ‘better’ guarantor loan companies going, tell him to phone them & explain the situation.

Getting a guarantor proves very difficult these days. I have a loan with Amigo for £1000, trying to top up to £1500 & can’t get a guarantor for it.

I hope your friend gets it sorted, Shame on the borrower for leaving him in the lurch like that.

tonycottee · 14 January 2018 at 11:33AM

MachoShirts wrote: »

A friend of my co-signed a guarantor loan from Amigo Loans for a work colleague and believed he was able to back out at any point - the loan was for £10,000 over five years with approximately £18,000 repayable over the period.

I would ask your friend to check that the figure is correct. That sounds awfully cheap for an Amigo loan. Their interest is usually 49.9%, so the total to pay back is almost £24k.

Caz3121 · 14 January 2018 at 11:46AM

tonycottee wrote: »

I would ask your friend to check that the figure is correct. That sounds awfully cheap for an Amigo loan. Their interest is usually 49.9%, so the total to pay back is almost £24k.

agree
£10,000 loan @ 49.4%APR over 60 months would be £455.34 per month
£17,320 interest meaning £27,320 due back in total

soolin · 14 January 2018 at 2:25PM

Stu5788 wrote: »

I find Amigo one of the ‘better’ guarantor loan companies going, tell him to phone them & explain the situation.

Getting a guarantor proves very difficult these days. I have a loan with Amigo for £1000, trying to top up to £1500 & can’t get a guarantor for it.

I hope your friend gets it sorted, Shame on the borrower for leaving him in the lurch like that.

ONly my opinion of course but I'm actually pleased that it is getting harder to persuade someone to be a guarantor any more as that means people are waking up and actually understanding what they are committing to.

Stu5788 · 14 January 2018 at 3:22PM

Some folk wouldn’t mind doing it & others just aren’t in the position to do it.

I only need my top up as I’m currently off for a 6 week holiday from work - go back to work on January 29th. Before I finished up I made a payment to the current loan that covers payments until I’m back & getting a regular wage again so the danger of me skipping payments is slim to well nil. Tried contacting work agencies to keep me ticking over while I’m off but none will entertain me for a fortnight of work.

sourcrates · 14 January 2018 at 4:03PM

I suppose the question you must ask yourself is what happens if both the borrower and the guarantor go Bankrupt.

Bankruptcy wipes the slate clean as far as CCJ`s, or liability as a guarantor goes, so the loser would be Amigo.

Loan Guarantor - Debt Relief Order

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