What is the criteria for applying?

Posted byDaniel Tannenbaum | Category useful information | Date 22 March 2016

At GuarantorLoanComparison, we act as a comparison site which is authorised and regulated by the FCA as a credit broker. So we don’t have our own personal criteria for applying – we recommend a number of leading guarantor lenders that you can apply with and they tend to follow the application criteria below:

Most of our lenders have the following criteria

  • Applicant is over 18 years of age
  • Must have a guarantor over 21 years of age
  • Applicant and guarantor are UK residents
  • Both parties in employment earning at least £500 per month
  • Must have a working mobile phone and email address
  • Must have a working debit account
  • Not in a state of bankruptcy or IVA
  • Will consider those on long-term benefits and pensions

Age of the Applicant and Guarantor

The borrower that is applying for the loan must be over 18 and they may be required to show proof of this using a driver’s license, payslip or P60 form.

The guarantor typically needs to be around 25 years of age or older. The lenders we feature specifically offer guarantor loans which means you have to have an additional person you know involved in the transaction. If this person has a good credit score, employment status or is a homeowner, it will increase trust with the lender and enhance the chances of your application being successfully funded.

The typical guarantor is usually a family member, sibling, spouse or friend that the borrower knows and trusts very well. However, because the guarantor takes on a lot of responsibility such as agreeing to repay the outstanding balance if the borrower cannot, they are required to be a little older.

If you do not have a guarantor but would still like to apply for a loan for up to £10,000, please visit our no guarantor loans page. 

Need to be living in the UK

Borrowers and guarantors alike are required to be UK residents and some lenders will exclude Northern Ireland, Channel Islands and Isle of Man.

The reason for this criteria is that customers need to be easily contactable and also because it is easier to cross-check the addresses and details of the individuals if they are living in the UK.

There is always the risk that if one of the stakeholders is based overseas, they will be hard to contact and may go awol.

Both parties need to be currently employed

Most guarantor lenders require both the borrower and their guarantor to be in some form of employment, whether its part-time and full-time but earning a minimum of £500 per month.

The main borrower needs a source of income in order to repay the monthly instalments – hence loans are unlikely to be available for those that are unemployed or on benefits.

The guarantor will of course need to be employed as they are considered the back-up option who supposedly has a better financial position than the main borrower and should have disposable income to repay the loan if the main customer defaults.

As part of our lenders’ commitment to responsible lending, they are required to carry out thorough checks to confirm your employment status and income. Therefore, when your application is being processed, it is likely that your chosen lender will request the most recent pay-slip or bank statement copy from you and your guarantor to confirm this. How much you can borrow for your loan will actually largely depend on your income and your guarantor’s income so this is an important affordability measure.

pay-slip-example

You will need to have a working mobile and email address

Our lenders want to be able to contact you easily. Before your loan has been funded, they need to be able to call you and email you with questions regarding your loan. Every customer and guarantor needs to understand exactly how the process works and the responsibilities of each party.

If the credit and affordability checking has been successful, a loan agreement will be sent by email and need to be ‘electronically signed’ by sending a PIN code to the customers’ mobile phone. So this will allow them to verify that the phone is theirs and they can be contacted in the future. Furthermore, it means that you won’t have to manually sign anything, post it off and wait – you can sign online and process your application quicker.

e-sign-mobile

Working debit account to take payments

Customers that apply and their guarantor must have a UK debit account in order to receive the funds into their account and then make repayments.

Repayments are made on a monthly basis in equal instalments and are collected automatically on the customer’s pay date using Continuous Payment Authority.

Guarantor lenders do not accept credit cards because it is like using credit to pay off other credit and so this must be avoided to reduce the risk of debt problems.

Borrowers cannot be bankrupt or in IVA

Most lenders will not approve those facing bankruptcy or Individual Voluntary Arrangement. This is why all lenders carry out credit checks using a credit reference agency in order to better understand a customer’s financial situation.

The reason for not lending to those with in a state of bankruptcy, CCJ or IVA is because a guarantor loan may add further debt problems to someone who cannot afford it. High cost short term loans are supposed to be for emergency purposes and for short periods of time, not for long term solutions to financial difficulties.

Guarantor loans should not be used to repay other loans or for impulsive consumer spending such as holidays, clothes, presents, cars or similar.

For those experiencing financial trouble, visit: https://www.moneyadviceservice.org.uk/en

Don’t forget, other lenders checks will apply

The criteria mentioned above is only the criteria for applying. Whether or not your application will be successful will depend on the lender’s own checks including credit and affordability measures and their own underwriting practices to assess whether your eligible for a loan.