At GuarantorLoanComparison, we are passionate about responsible lending. We review all the lenders that we feature on our website and only select those that follow the responsible lending criteria enforced by the Financial Conduct Authority.
What is Responsible Lending?
Responsible lending refers to the way that lenders can act in a customer’s best interests and this includes:
- being transparent in what they charge
- carrying out thorough checks before providing a loan
- offering forbearance if a customer is experiencing repayment difficulties
Companies that follow responsible lending practices will always do what is best for the customer, even if this means denying them for a loan. It is also about finding the best product and the right product for the customer’s needs. For instance, altering the amount the customer wishes to borrow so that they can afford repayments.
Our Promise
GLC is not a lender. We are a comparison website which is authorised and regulated by the FCA as a credit broker. To keep our site free, we may receive an introductory fee from the company we refer you to. However, we acknowledge the importance of responsible lending.
Our promise to you is to show a clear comparison of guarantor loans in the UK. Using our table, one can clearly see the name of the company, APR, loan duration, representative example and amount they can borrow. Plus, it is clear to see where to apply and you will be taken directly to the lender’s website to fill in an application.
We promise not to ask you to fill in details and we will not pass these on or sell them to third party companies without your permission. All our lenders are direct lenders which means that they will be the ones that will process and fund your loans – you will not go through any other middlemen and you will be able to proceed with the lender directly.
To emphasize the security, we have added an https to our site which encrypts any data on the pages and makes it harder to access from external parties.
How do your Lenders follow the Responsible Lending Criteria?
Our lenders are following the responsible lending protocol by having a strict application criteria and following collection practices that are in the interest of the customer, as highlighted below:
Transparency
The lenders we feature clearly display the cost of their loans on their websites and do not change these during your loan duration.
Through an online loan agreement or pre contract agreement (SECCI), you will be made aware of your loan terms and conditions and any extra fees and charges. Borrowers will be required to sign this electronically by receiving an SMS code sent to their mobile phone.
An initial criteria
The lenders we feature will have an initial criteria such as:
- over 18 years of age
- a guarantor over 21 years of age
- both the borrower and the guarantor must be employed earning a minimum of £500 a month*
- must be UK residents
- must have a working debit card
- must have a working mobile and email account
*terms will vary from lender to lender
By having this criteria in place, lenders are able to narrow down those applicants that are most suited for a guarantor loan product. These questions will usually be asked in the application form and revisited when the lender conducts a phone call with both the borrow and the potential guarantor.
It would be irresponsible to lend to applicants that are too young and not employed – as this will make it too difficult to keep up with payments.
Affordability Measures
An essential attribute of responsible lenders is to carry out affordability measures to match up how much the customer wishes to borrow and what they can afford to repay.
A borrower may wish to take out the maximum amount but it important the lender checks whether they can afford it including:
- their current employment status
- current take home/salary
- level of outstanding debt
Responsible lenders will always ask you to confirm the amount that you earn and may request proof via a bank statement or recent pay-slip.
It is also important to acquire the same information from the guarantor too because this is the person that must afford to repay the loan if the main borrower cannot.
Good affordability measures will reject an application if the borrower cannot afford it, reject the guarantor or lower the amount the customer wishes to borrow so it is easier for them to meet repayment each month.
Credit Checks for the Borrower and Guarantor
Credit checks carried out by lenders are an important part of responsible lending. Using a credit reference agency such as Experian, it provides and up-to-date insight into their current debt to loan ratio – so lenders can get an idea of whether the customer has any other loans open or has experienced bankruptcy or a CCJ.
Something that is highlighted by the FCA is that there are credit checks for the guarantor too. Typically those guarantors with a good credit rating will increase the likelihood of the loan being approved. A good credit score suggests a good history of repaying loans and this fills the lender with confidence knowing that they will potentially repay the loan if the main borrower cannot.
Collection Practices
Responsible lenders will also follow collection practices that are in the best interest of their customers.
Firstly, the lenders we work with will give the borrower notice before payment is due. This will remove any potential surprise of funds being withdrawn or default fees for late repayment. It gives the customer some time to make sure that there is money in their account or at least contact the lender if they know that they won’t be able to repay.
Lenders must also only collect the amount that has been promised and not collect anything more.
If a customer is experiencing financial difficulty in repaying their loan, the lender should be available and offer forbearance – a gentle and helpful way to allow the customer to repay their debt.
A responsible lender may allow a customer with payment problems to extend their loan without extra charge, freeze interest, offer an arrangement and not provide rollovers or extra loans that the customer won’t be able to afford to repay.
Resources – Where to go if you cannot repay
• Money Advice Service – moneyadviceservice.org.uk
• Citizens Advice Bureau – a network of local offices offering free, confidential independent advice –www.citizensadvice.org.uk (England, Wales and Northern Ireland), or www.cas.org.uk (Scotland)
• National Debt line – a free, confidential and independent telephone helpline for debt problems www.nationaldebtline.co.uk or on Free phone 0808 808 4000 (England, Wales, and Scotland)
• Advice UK – a network of independent advice-providing organisations. www.adviceuk.org.uk
• Credit Action – http://themoneycharity.org.uk/ or tel: 0207 380 3390