Being a Car Loan Guarantor!

Marie27lol

Hi All

Hubby has offered to be a guarantor to a good friend for £5k to get a car which is required for work (car type specific).

Will this affect his / our credit rating for us to get a LTB and BTL mortgages, which we will be applying for next week (if our offer gets accepted :P )

One house solely in my name, 2nd in both names. We currently have excellent credit ratings, and no loans except our residential mortgage.

Hope you can give me a little indication tonight, as he has to restart work on Monday and needs at least 5 working days for money to clear to get the car... Talk about tight deadlines.

Watchingthisthread


M

DCFC79

Your credit ratings aren't used by lenders for loan purposes as they don't see them. I could be wrong but I believe it's treated as a normal loan, I take it your both away of what being a guarantor entails ?

You or he would be better off getting a loan, less expense and if the friend stops paying you or your husband even won't be contacted by the lender wanting payment whereas with a normal loan your husband will pay.

Can't answer the question if it will affect the mortgages.

Marie27lol

Howdi DCFC79,

Aye if they default, we have to carry on the monthly payments until the end of the term. Its about £150/mth over 5 yrs.

Loan is through Amigo, so it's not car hire purchase.

Does anyone ideas if it affects getting mortgages?
M

dimbo61

Repay £9,000 for a £5,000 loan over 5 years.
So second hand motor which he may not have in 5 years but will still be paying for Ouch !
Why can your friend not get a loan from the high street Poor credit ?

Pixie5740

I think Amigo will perform a credit search on your husband when his friend applies for this guarantor loan. That search will show up to mortgage lenders I think.

Since your husband would be liable for the full loan amount if his friend should default (there is a reason that the only way this friend can borrow £5k is using Amigo) it could impact your affordability.

Stevie_Palimo

There are Companies out there that will offer credit to individuals with a less than poor rating and if you check online there are several that will do this and install a box in the car so if they default the car will be locked so they cannot drive it and then taken away.


Do not ever offer to be a guarantor as it rarely works out well when the person you are helping starts to struggle or loses there income which leaves you with a bill to pay and more so Amigo loans part of the Richmond Group Ltd with the very high apr.

Senior_Paper_Monitor

Two negative impacts ...


1) There is a likelihood that this will establish a financial association between guarantor and borrower - for many lenders the record of a financial association means that the record of the associate will be considered in the overall evaluation


2) The majority of applications ask for details of any credit arrangements including those which you guarantee - and count those into affordability calculations


I am not 100% certain of the amigo credit searching process (it definitely searches the guarantor) or its reporting process to the CRAs but I would avoid the suggested transaction - there are no upsides and a number of potential downsides.

Marktheshark

People that lend money have access to information this friend is concealing from your husband.

This information has resulted in this friend unable to obtain a loan at normal rates which is 8% in fact he is totally unable to obtain any loan, this is for a very good reason, he does not pay debts.

A guarantor loan means it will be your husbands loan but someone else gets the money.

When this friend decides not to pay, your husband will be left with huge default fees and 49.9% interest APR to pay and the loan payments.
By Deed of Indemnity your Husband will be paying this back, that is almost guaranteed as he is the guarantor .

The person asking obviously has very poor credit history and the reason behind this is they have issues debts.
If they did they would not be asking friends about borrowing over 5 years at 49.9% APR for them .

Your Husband will actually be signing for £13,660 of payments plus defaults.
The amount of loan is immaterial, his liability is £13.660 if he can avoid default interest rates.

Here is what will happen in an average scenario.
The car breaks, they stop paying, they fall out, you pay the loan.

He needs to be absolutely clear how this works :
Your Husband signs for a £13.660 loan
The friend gets a cheque for £5000.

The friend does not pay the loan, the interest is compounded by default and this friend is walking around with £5000 and you with £13.660 worth of debt.
Payments on compounded default rates will be £227 a Month for 5 years

No real friend would put that strain on a friends relationship and financial well being.
I think you need to sit him down !

chanz4

It will effect you, tel him go available car or the other bad credit ones

Immers7

Might aswell loan him the money yourself.

WillyWonga

Amigo Loans credit score the guarantor to make sure they are "decent". The money is then paid to the guarantor for them to pass on to your friend. In reality the friend only has to give their bank details to collect the DD. You have to be of good credit score to get passed and at nearly 50%!!! Which you will have to pay if the friend fails.

Think - you are passing the friend £5k cash..... if things turn sour then can get ugly.

You say its for a car - car finance can easily be obtained even for the most credit low scoring people as loan secured on car - you don't pay then the car gets taken away. Your friend doesnt pay the Amigo loan then the money comes out of your bank account until the end.

Its ok lending a friend a few quid to tide them over but £5k?????