guarantor loans

arowsell

Hi,

I was wondering if you guys could help. I have a friend who requires a loan of around £4000. She has a poor credit rating which is preventing her from getting a loan with a decent APR.

I was going to act as her guarantor but I am having difficulty finding banks or main stream lenders that provide guarantor loans. I have tried Barclays, HSBC, Santander, Alliance & Leicester but none offer this service.

I have obviously thought about taking the loan out myself and my friend paying me back directly but this would not help her credit rating.

Does anyone know the best places to get a guarantor loan?

Any help is much appreciated
Andy

USM

You must be absolutely barking mad.

Tixy

Hi Andy

Can you afford to give your friend £4000? because this is what you are potentially taking on, and risking your own credit rating as well.
High street banks don't generally offer guarantor loans for a good reason, its why you have to go down to the low-level lenders.

Your friend has already proven she is a bad credit risk or had issues paying in the past - are you sure you want to take the risk when a bank much richer than yourself won't? Have you seen detailed copies of her credit reports? I would expect that as an absolute minimum.

If you really want to give her this money then get a loan out in your name at a much much better interest rate. Your friend can then focus on improving her credit rating herself with a subprime card of similar. See here - http://www.moneysavingexpert.com/cards/bad-credit-credit-cards

Though if you are considering loaning her the money then might be worth a read of this thread - all about the many posters whose good friends didn't pay up, and that even when people end up taking their ex-friends to court they often don't have any money or assets to actually get the debt repaid. Lending money to friends & family

CHR15

Crazy idea, absolute madness.

If her credit rating is that bad, she has already had all manner of legal theats from recognised companies but thought nothing of ignoring them.

Do you honestly think she will make an exception to you, who will have nothing to back you up when she stops rpaying this debt?

Either she is taking you for a mug, or you have no idea what lies in store for you.

Do you have any plans on taking out a loan in your name before this is repaid (even if all on time)?
If so, consider your exposure with a £4k loan on top of your current commitments, this will have a negative effect and restrict your own options in the future.

Don't take this plan forward for your own sake.

arowsell

Thanks Tixy.

I know loaning money to friends is always awkward and can go horribly wrong but I can afford it and she is a very close and trust worthy person. She just has some bad credit from her student days which is still hanging around her neck.

I'll check her credit rating and see what the best deals are available to us...

I guess the best way to improve her credit rating would be to follow the guide you pointed me to above.

I was really just wondering if anyone knew of places that offered decent APR for loans with an acting guarantor.... i guess the answer is none.

Anyway, you help is much appreciated!!!

Tixy

Okay well you've got the message that we wouldn't recommend it, and I don't think you will find a decent APR on a guarantor loan. If you decide you are going to do it then please do all you can at the start to help you should things go wrong.

So ensure you have a written agreement in place that details how much she borrowed, how much she will pay back and by what method, monthly amounts, interest rate etc. Make sure its signed by you both and a witness and both keep a copy.
It won't guarantee your money is safe but it will make it easier to put pressure on her to repay if she starts to miss payments and would help you in court if you ever had to take it that far. It also might help her take the situation and the loan more seriously.

Ideally get her to pay by standing order. If she is going to pay you by cash then make sure you record all the repayments in detail so you can show how much she paid - you might even want to get a duplicate book and use that to give her a receipt.

Do you know what she needs the money for? is it a real need? Sometimes there are other ways to help friends by suggesting you help them out with learning to budget and perhaps they can start saving instead - or if this is for a purchase by helping them research how to get it cheaper. If she is thinking of borrowing this money to pay off other debts then instead I would suggest instead you advise her to seek help from one of the debt charities - (see here IMPORTANT - Where to seek professional impartial advice about your debts. ).

arowsell

hmmm you guys really are against this idea. lol

The loan is to consolidate some debts and just make them easier to manage and hopefully with a lower APR... her credit rating is poor but not horrific. Although we haven't applied for any loans currently, I'm sure she could borrow the money from "somewhere" if really necessary...

We were just looking at whether there were any places that offered guarantor loans that would beat the deals she would otherwise have to look at... Having the loan in her name also helping with her credit rating.

I think I will check the debt charities out next and see what they have to offer....

Thanks for all your help through this financial maze!

Tixy

Obviously it depends on her situation but it might be more sensible to consider a debt management plan. On a DMP she and a charity work out a reasonable income & expenditure account and then works out how much she can afford to pay towards her debts each month. She then pays that amount to the charity who then distribute it to her creditors fairly. Creditors will often agree to freeze interest altogether (its not guaranteed but they often will).
A DMP won't help her credit rating -but if its poor already its unlikely to make it much worse.

Just so you are aware there are companies out there who charge for DMPs (take a cut of the monthly payment) so she needs to ensure its one of the charities she is dealing with. It'll certainly be worth getting some advice from a charity, she won't be tied in to anything just for speaking to them and they will offer her proper impartial advice.

Good luck

hur575

Unless she has immaculate credit record loans are very hard to come by these days, you also said she has other debts which lender will look into.

I know you mean well, unless you are prepared to give her the loan as gift do not do it. I am not suggestion she will not pay you, because she is not honest person but she might not afford it.

The best thing you can do for her to help her budget and sort her mess herself, most of us been there as student I took credit card as free money but life teaches you, so let her sort it out, and your excuse can be, there are no decent APR for guarantor loan.

iolanthe07

Honestly, Arowsell, this is a disaster waiting to happen. Please read some of the numerous threads here from people who tried to help out family or friends before you do anything. If you do go ahead follow Trixy's advice and get everything in writing, signed and witnessed.

Hax

Also worth remembering that there are many stories of people who have consolidated their debts into a loan with a smaller monthly payment, but they haven't actually addressed the reason as to why their finances got into this mess in the first place.

In such cases, all that ends up happening is the person continues to spend at the same rate, living beyond their means, and just racks the debt back up again - only this time, they also have the consolidation loan too - meaning that they are in greater financial problems than before they took out the consolidation loan.