I need advice about someone standing guarantee on a loan.

Stone_Fox

Question: If my father is prepared to stand guarantee for me on a loan, how much does my poor credit history matter? Basically, can I go to the premium lenders with the best interest rates?

Background: I'm a self employed engineer with a poor credit history (that behavior is years in the past) and I've had a couple of personal dramas and I need to take out a loan. My father (a homeowner who's never missed a bill in his life) who's both familiar with my work (and does some contract design work for me) is more than happy to stand guarantee.

DCFC79

I know its not something you asked for (so i understand if you dismiss it/ dont respond) but have you thought of what would happen if you didnt make a payment 1 month ? Your fathers credit history could be trashed.

HappyMJ

Stone_Fox wrote: »

Question: If my father is prepared to stand guarantee for me on a loan, how much does my poor credit history matter? Basically, can I go to the premium lenders with the best interest rates?

Background: I'm a self employed engineer with a poor credit history (that behavior is years in the past) and I've had a couple of personal dramas and I need to take out a loan. My father (a homeowner who's never missed a bill in his life) who's both familiar with my work (and does some contract design work for me) is more than happy to stand guarantee.

The interest rate will be based on your credit rating.

If your father trusts you enough to go guarantor then you would be much better off if he took out the loan in his name and you paid him back. If you are buying something like a car then give him the ownership documents to the car to use as security for the loan.

[Deleted User]

Stone_Fox wrote: »

Question: If my father is prepared to stand guarantee for me on a loan, how much does my poor credit history matter? Basically, can I go to the premium lenders with the best interest rates?

No. It's generally only the lower end of the market that deal in guarantors.

You could ask a high st lender but I think it's very doubtful.

Tixy

The best interest rate would likely be obtained by father taking out a loan in his own name with a mainstream lender (subject to his age and income).

The other advantage of this is that as he will then be repaying the loan company himself he will know for certain that the payments are being met and his credit rating will be preserved.

Stone_Fox

DCFC79 wrote: »

I know its not soemthing you asked for (so i understand if you dismiss it/ dont respond) but have you thought of what would happen if you didnt make a payment 1 month ? Your fathers credit history could be trashed.

It's something that not only am I aware of, but has been fully considered. Hence the remark about my father knowing my business and cash flow. On a £5k loan at a decent interest rate the repayments are between £175 and £200 a month. Easy for a working adult with no dependents to manage.

Oh, and 1 late payment wouldn't "trash" someones credit history. That's even if it did go on his record without me defaulting completely and them asking him to make good.


To everyone with the helpful advice...

Thanks. I hadn't realized I'd be restricted to sub-prime lenders. >.<

Can anyone think of a good comparison site? Or somewhere that'd list lenders that'd be available to me? I'd prefer to keep it in my own name for several reasons;- it'll help my credit score, I'd prefer the onus of responsibility be on me, and asking him to be guarantor is a lot different from asking him to take out a £5k loan and give it to me!

Tixy

Most guarantor loans do not help your credit rating, in many cases the debt actually appears on the guarantors credit file all along.

and asking him to be guarantor is a lot different from asking him to take out a £5k loan and give it to me!

Its not a lot different at all, except that it is likely to be far more expensive. 50% APR is typical for guarantor loans.

Stone_Fox

Tixy wrote: »

Most guarantor loans do not help your credit rating, in many cases the debt actually appears on the guarantors credit file all along.


Its not a lot different at all, except that it is likely to be far more expensive. 50% APR is typical for guarantor loans.

Wow. I hadn't spotted the 50% thing! 0_O

Thank you for that...

One thing though, the reading I have done has all told me that it WILL improve my credit rating.

The_Independent wrote:

It's also possible to rebuild your credit history by demonstrating that you are a responsible borrower and are able to make the repayments on time.

http://www.independent.co.uk/money/is-a-guarantor-loan-right-for-you-8500128.html

And what do you mean by " appears on the guarantors credit file all along"...? If it's in my name, it'd be on my credit score. As far as I was aware, the guarantor is only contacted or affected in any way if I default. And even then they're offered the option of meeting the repayments before it becomes a black mark on anyone's permanent history...

Or have I misunderstood something...? :huh:

DevCoder

As soon as you miss one payment then the late payment marker goes on both files, a lot of guarantor loans also appear on the guarantors credit file as well (and the search footprint obviously will).

tiger_eyes

OK, I can understand why you wouldn't feel good about asking your father to take out a loan on your behalf, but he's going to be personally responsible for every penny of the loan either way. The responsibility he's undertaking as a guarantor is just as big as taking out the loan himself, except he has less control over the situation. Plus, by asking him to guarantee a higher-interest guarantor loan for you, you're inadvertently increasing his financial liability (because the total sum repaid is greater) compared to him using his good credit history to take out a personal loan at a lower rate. It may not feel good emotionally, but rationally I think your father would be better off taking the loan out himself.

gb12345

How about some figures to help you see sense.

£5,000 borrowed over 5 years.

If your father got a 10% APR (he might even get lower) then you would be paying about £106 per month and would pay £1,374 interest.

Your guarantor loan with its 50% APR would cost £228 month and you would pay £8,681 interest.

Is what you are planning on spending £5,000 on really worth nearly £14,000?