Recommended guarantor loan - something like Amigo Loans?

Jev88

My son (25) has always been self employed and never had a credit card or any sort of loan.

He now needs a loan of circa £6,000 for musical related equipment - not work related (yet!)

I know amigo loans offered a service where a parent/friend could be the counter signatory on a loan and this helps him establish a credit record.

What are the best, most reputable companies to offer something like this?

Sandtree

Why bother with the very high APR of a guarantor loan rather than a lower APR of your own loan that you lend to your son directly?

If your son doesnt pay the guarantor loan then you have to and as such are in the same position as if your son refuses to repay you.

Ebe_Scrooge

As above, forget about a guarantor loan, they are the spawn of Satan.  Does your son need to borrow £6000, or want to?  Either way, you're far better off to take out a loan yourself at a much more sensible rate, give the money to him, then let him pay you back.  The net result is the same, and you'll save a fortune in interest.

If your son's primary aim is to begin building up a credit history, then a credit-builder credit card is the simplest way (assuming he can be trusted to be disciplined and understands how a credit card works).  This is the simplest way, and will cost nothing.

sourcrates

Jev88 said:

What are the best, most reputable companies to offer something like this?

Any company with a starting APR of 49.9% should not be regarded as "reputable".

Companies that offer such loans do so as its a niche market, and a good money earner for them, surprisingly default rates are no higher on guarantor loans than standard repayment loans, however they seem to attract a lot of mis-selling complaints, which was the ultimate fate of Amigo.

Although they are still in business, they have not yet dealt with the large number of complaints against them.

Really this type of loan product is one to avoid.

Jev88

Can you point me to credit rating building credit cards

Sandtree

Credit Cards for Bad Credit: top credit building cards - MSE (moneysavingexpert.com)

Lack of credit is almost the same as bad credit

Edi81

Why doesn’t he start with his bank?
they will be able to see what money goes in and out of his account. 

Jev88

Edi81 said:

Why doesn’t he start with his bank?
they will be able to see what money goes in and out of his account. 

He tried Nationwide and they said no in a discussion over the phone.  Makes no sense as he pays £20K a year into the account but they seem fixated on being self employed

Ebe_Scrooge

Jev88 said:

Edi81 said:

Why doesn’t he start with his bank?
they will be able to see what money goes in and out of his account. 

He tried Nationwide and they said no in a discussion over the phone.  Makes no sense as he pays £20K a year into the account but they seem fixated on being self employed

One's own bank is often recommended for someone with very little credit history, as - in the absence of any CRA data - they can at least see how you've managed your finances in the past.  That's no guarantee that they'll offer you credit, of course - in this case, your son simply doesn't meet their internal lending criteria, for whatever reason.  One reason could be simply down to affordability - a loan of £6000 represents a fairly high proportion of £20K income.  It's nothing personal, just down to cold hard statistics.  Added to which, "self-employed" is often - rightly or wrongly - interpreted as "variable income".

Go bank to Plan B - one of the "credit builder" cards.  They tend to have much more relaxed lending criteria (as that's the market they're targetted at).  They charge a much higher APR to cover their increased risk - but that's of no consequence so long as you pay the full statement balance every month - which is absolutely what you need to do (quite aside from any consideration of the actual cost of interest) if you're trying to build up a good credit history.

Brie

Jev88 said:

He tried Nationwide and they said no in a discussion over the phone.  Makes no sense as he pays £20K a year into the account but they seem fixated on being self employed

Did they say no to a loan or a credit card?  I'd start with a card if I was him.  

TripleH

Not knowing what your son is after  but could he not buy the equipment he needs second-hand? If he is still learning his craft musically he may change his mind down the road. This way he gets something more affordable that he may find his finances are easier to stretch to.

No idea about what he is buying but I suspect there will be people who 'have a dream' buy the equipment and then find reality quite different so he could pick rarely used but good stuff quite cheaply?