Amigo Loans Extortionate rates

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JeremyC1971
JeremyC1971 Posts: 1 Newbie
in Loans
I was recently asked to be a guarantor on a friend's loan for £5k. He is a very old friend, liquid, he and his wife both work, they have equity in their house etc. Unfortunately, he lost his business 3 years ago and is spending 7 years paying off the debt he'd racked up which has affected his rating.

I agreed to be guarantor and preceded to fill out the form. However, on further investigation I realised that the loan (£5k remember) which was repayable of 60 months at £197 per month, was going to add up to interest of £6857 (that's the interest only).

I did a comparison with Nationwide and if I paid the same repayments the loan would be cleared in 27 months and the total interest would be £261.

So in other words, Amigo loans are charging 26 times the high street rate despite having the added security of a credit worth guarantor.

Does anybody know whether this is worth flagging with the ombudsmen? I am appalled at how unscrupulous these companies are being in taking advantage of the disadvantaged, people who are just trying to get back on track. With rates like that, it's no wonder people can never get off the bottom rung.

Thank you for reading.
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  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
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    No, not worth going to the Ombudsman. They can charge the rates they want and the customer can accept or not.

    Agree it's a cunning business model to effectively charge sub prime rates to prime guarantors, but customers seem to like it for some reason.
  • MallyGirl
    MallyGirl Posts: 6,656 Senior Ambassador
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    and don't forget that if he doesn't keep up with repayments it will be you who gets hit with that interest rate as his guarantor.
    Can you not loan him the money yourself?
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  • Oakdene
    Oakdene Posts: 2,560 Forumite
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    If you can get the loan from Nationwide, take it out & pay the Amigo loan off & get your friend to pay you the monthly repayments
    Dwy galon, un dyhead,
    Dwy dafod ond un iaith,
    Dwy raff yn cydio’n ddolen,
    Dau enaid ond un taith.
  • tidds
    tidds Posts: 132 Forumite
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    Agree with MallyGirl - best thing to do is take the loan out yourself if you don't have the liquid cash. It's effectively you taking out the loan anyway, but this way if any issues the interest paid is less - plus, his monthly amount to you would be less also, making less chance of an issue.
  • MrsTinks
    MrsTinks Posts: 15,241 Forumite
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    DO! NOT! DO! IT!

    Don't guarantor any loan ever. You have no control over the loan, you are tied in for the duration too and the full amount could be retrieved from you.

    You would be better off helping your friend with his budget and looking at better products.

    The Amigo loan and similar are all legit, if distasteful, and are partly down to the high risk profile of those looking at them and the high failure rate. I don't like them any more than I do payday loans, but so long as people take them out and stand guarantor then they will stay in business.

    Your friend may be better off on a DMP where there is a good chance his interest will be frozen on his debts. Tell him to come post on the DFW boards before he takes this insane loan out!
    DFW Nerd #025
    DFW no more! Officially debt free 2017 - now joining the MFW's! :)

    My DFW Diary - blah- mildly funny stuff about my journey
  • Pixie5740
    Pixie5740 Posts: 14,515 Forumite
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    No it does not need flagged up to the ombudsman. Amigo Loans clearly state that their representative APR is a whopping 49.9% (variable). The reason Amigo can charge these rates is because Amigo borrowers are desperate borrowers that no other lender will touch with a 10' barge pole.

    How will taking out this guarantor loan help your friend? Do his current debts have rates greater than 49.9% APR? If not then it is madness for him to consolidate with an Amigo loan as he will end up paying back even more interest than if he just keeps his debts as they are just now.

    Forget acting as guarantor for him and tell him to contact National Debtline instead for impartial advice. If the debts are business related then Business Debtline might be a better shout.
  • Smodlet
    Smodlet Posts: 6,976 Forumite
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    All of the above. As soon as I saw Amigo loans, I could have told you the APR from their adverts, 49.9%. The reason they stay in business is because that is considerably lower than the other payday loan companies' ridiculous rates of approximately 1800%. They are all sharks but legal ones. The print may be small but it is there, at the bottom of the screen in their advertisements, ergo legal.

    If you really want to help your friend, have nothing to do with these parasites. As has been said over and over, it will be you they come after when/if he defaults... will you still be his friend then?
  • Helvetica_Van_Buren
    Helvetica_Van_Buren Posts: 270 Forumite
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    You haven't been mis-sold anything. The time for reading the interest rate was when you signed for it, not now.
  • DCFC79
    DCFC79 Posts: 40,598 Forumite
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    edited 11 October 2016 at 4:09PM
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    No theres nothing wrong with the rates from Amigo, its a cunning model but its 1 that works. They advertise the rates are clear as day, they arent hidden. The rates are most likely high as borrowers stop paying.

    Not sure what you would complain about to the ombudsman.

    Are you aware of what is entailed being a guarantor ?

    Dont go in blind. Be easier for you if you take out a loan as suggested and give it the friend.
  • Brooker_Dave
    Brooker_Dave Posts: 5,196 Forumite
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    Parasites will get what's coming to them eventually.
    "Love you Dave Brooker! x"

    "i sent a letter headded sales of god act 1979"
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