Amigo / FLM Loans - Guarantors Please be careful!!

sistafromanothermista

FinanceForEveryone wrote: »

Grammer mistake from the owner! I reckon these guys are worse than payday loan sharks as they shirk the risk and responsibility from a borrower, to another party, the guarantor. Plus, the loan is much higher value and longer term than a payday loan so the net amount repaid in interest is much much higher. Now I hate payday lenders, but at least they take on the full risk of the loan themselves!! :mad:

Grammar



DCFC79----couldn't agree more. No-one forces anyone into anything. If the guarantor is silly enough not to read the terms and conditions then.......

FinanceForEveryone

They dont make the 1 who is the guarantor sign his name on the dotted line, the guarantor is persuaded to sign the contract as they are promised the payments would be kept up to date.

Irrelevant as the guarantor underwrites the loan - they even pay the money into the guarantor's account. The borrower merely facilitates the sourcing of this guarantor.

All they are doing is offering a service, no 1 is being forced to get into bed with these guys.

A service that is actually redundant, considering you can sign an agreement yourself between the lender and yourself, a redundant service Amigo loans charge the borrower and potentially the guarantor a high 49.9% APR for. True, no one is forced, but they prey on the desperate and vulnerable - they even advertise on nationwide TV so evidently are doing pretty well financially.

...they're a bit like those debt consolidation companies that charge for a service you can get for free down the Citizen's Advice bureau, if you're not clever enough to do yourself...

People can do they're own research on whats involved as being a guarantor but I bet some dont bother.

Hence why I bothered to start this thread here. Perhaps the title should have been "Amigo Loans - Guarantors please beware". Save yourself unnecessary risk, hassle and money and download an agreement template with all the relevant contractual details, as the Love Money article suggests.

FinanceForEveryone

Amigo Loans are currently advertising on national TV justifying an APR of 49.9% for their loans ranging up to £5,000. Their target market is people with low credit ratings that cannot borrow from their bank. They justify their high APR by comparing their rates to payday lenders on one hand, but on the other, saying they will lend more freely than banks. This is incredibly misleading so please beware!!

Unlike the much shorter-term payday loans, Amigo loans are mid-term loans, typically spanning 3 to 5 years, and underwritten by a home owning guarantor (almost always a close friend or family member of the borrower), that a prospective borrower has to convince to guarantee their high interest loan. To be clear, payday loans are very short-term plus the payday lender carries all the risk – they don’t have any home-owning guarantor to repay the debt!

As this type of loan relies on taking someone that is very secure, and owns property, to underwrite them, they carry very LOW RISK to the LENDER, lower in fact that most bank loans would be willing to lend at sub 10%, but this low risk is NOT REFLECTED in the HIGH APR incurred to the borrower and often subsequently the guarantor!! Hence the only real winner is the loans company, and as such, this is a particularly lucrative business...while it lasts that is…

My advice would be to avoid these guys at all costs and if you really have no other option but to borrow money by involving a close friend or family member, please consider getting an agreement drawn up between you and your guarantor. Don’t involve a third party like Amigo Loans that can will either end up you paying back over twice what you borrowed, or end up DAMAGING YOU AND YOUR GUARANTOR’S CREDIT RATING!

You can download freely available templates with all the necessary contractual details, interest repayments, for witnesses to sign and date etc. This type of arrangement will incur much less cost to the borrower, and potentially carry much less risk and hassle to your close friend or family member – there are many posts on here by guarantor’s that have been lured into an Amigo Loans agreement that report being hounded by their collections department and threatened with court action, involving Amigo own litigating solicitors, to repay the remaining balance plus interest. In these situations, a perfectly likely scenario, the guarantor’s credit rating is ruined and Amigo Loans place a second charge on their property! It would have been much better for the guarantor just to have lent you the money and you not paid them back!

DCFC79

I seem to remember we have been here before, oh yes we have, only last month you started this thread on amigo loans. Dont you get bored of the same topic.

OneLife_OneShot

I get bored every new thread being about PDLs.

bankscausepain

I had never heard of Amigo Loans, until they started sending me emails. It appears, some poor soul with the same name as me took out one of their loans at a huge cost. They sent the emails to me, with all the contracts and confidential information.

I asked Amigo to stop sending me the emails and private data, to which they were extremely apologetic. A huge breach of confidentiality though, i'm sure.

Here are the figures cut and pasted from the contract:

How much are you borrowing? £2,750.00
Loan term: 60 months
Number of repayments: 60
How much do you pay each month: £108.69
APR (Variable): 49.9%

What is the rate of interest charged: 41.16% per annum (variable)
Total Amount Payable: £6,521.61 which consists of:

(a)amount of credit:£2,750.00(b)total interest of:£3,771.61


They are making a fortune from this guy. People are quick to condemn the Payday lenders, but these loan companies are just as bad.

Tiddlywinks

If you think advertising is misleading then complain to the appropriate regulator:

http://www.asa.org.uk/

For your points about terms and conditions - isn't this the same for everything? Buyer beware? Always read the small print etc.

Someone acting as a guarantor *should" make themselves aware of the risks of guaranteeing payment - again read contract before signing.

Finally, just because someone is prepared to act as guarantor does not mean they have available funds to actually supply the loan for a family / friend instead of them resorting to using a third party lender. How can you not understand this?

meer53

Caveat Emptor.

meer53

We've read this already. Why do we need to read it again ?

thatsean

Of course, what you say is true - but the people who borrow from these outfits don't really take this into account, and the fools who guarantor the loans for them don't take the time to understand the fallout from the inevitable default.

I can't see your post changing that I'm afraid to say.